Strong Economic Fundamentals Should Drive Continued Growth through 2017

Economic Incentives Gain Importance in Site Selection Decisions

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Nov 17, 2015, 01:54 ET

HOUSTON, Nov. 17, 2015 /PRNewswire/ -- After a slow start to the year, the U.S. economy performed very strongly during second-quarter 2015, but job growth weakened considerably during the third-quarter, leading to renewed concerns about short-term economic performance. In spite of these concerns, most fundamentals remain positive and should drive continued growth through 2017, according to the fourth-quarter edition of "Insights + Trends + Opportunities," a publication by Transwestern and Delta Associates that features a review of how the economy is impacting commercial real estate and valuable information for commercial property owners, investors, tenants and developers.

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ECONOMIC OVERVIEW

Real gross domestic product (GDP) growth for second quarter was 3.9 percent, a strong rebound from first quarter's tepid 0.6 percent
Surge in growth driven by strong consumer spending stemming from low gas prices and increases in disposable income
Real GDP is predicted to average 2.8 percent in both 2016 and 2017 and 2.5 percent in 2018
As of July 2015, the U.S. had added 3 million jobs during the preceding 12 months, but performance dipped in August and September
As of October 3, 2015, initial unemployment claims stood at 267,500 based on a four-week seasonally adjusted moving average, 24 percent below the 15-year average
Disproportionate job creation in lower-paying industries is partially to blame for the lack of significant growth in wages, which have increased at a slow rate since the end of the recession
Inflation remained flat during the 12 months ending August 2015, with a strong dollar and lower domestic energy prices keeping prices in check

ECONOMIC INCENTIVES IN SITE SELECTION

As a way to lure manufacturers to their communities, officials are increasingly willing to offer more than tax breaks, even promising cash upfront
In one example, Transwestern assisted Hoist Liftruck Manufacturing Inc. in identifying a 550,000-square-foot facility for acquisition and simultaneously secured a multi-million-dollar incentives package
In another example, Transwestern secured nearly $5 million in incentives in Georgia for the relocation of a light assembly facility from Alabama
The most successful incentive packages are collaborative proposals from government entities, utilities and employee training providers
Texas, Georgia, Louisiana, South Carolina, Wisconsin, Illinois, Indiana and Florida all offer aggressive packages

MULTIFAMILY DEVELOPERS ANSWER SHIFTING NEEDS OF RENTERS

Gaining popularity are "build-to-core" projects, where investors provide capital upfront for complexes in which they will eventually take ownership, allowing them to obtain the asset at a lower basis and eliminate a bidding war upon completion
Developers are delivering larger units to accommodate renters – such as baby boomers – who have been collecting possessions for decades
An example project is the Hayworth in Houston, where the average unit size is 1,400 square feet, and the largest residence is 2,200 square feet
On the opposite end of the spectrum are millennials, who need smaller, more affordable units
In Austin, Studio East units will average 400 square feet, with the largest unit at 550 square feet
To make up for lost living space, developers are creating a variety of socialization and lounge areas scattered throughout the complexes
As more millennials choose bikes and public transportation, developers are seeking transit-oriented sites and ones near key employment nodes
There may be some softening in rents and occupancy in the short-term, but pent-up demand is expected to reinforce fundamentals by the end of 2016

Download the full publication at http://twurls.com/insights4q15.

ABOUT TRANSWESTERN

Transwestern is a privately held real estate firm of collaborative entrepreneurs who deliver a higher level of personalized service – the Transwestern Experience. Specializing in Agency Leasing, Management, Tenant Advisory, Capital Markets, Research and Sustainability services, our fully integrated global enterprise adds value for investors, owners and occupiers of all commercial property types. We leverage market insights and operational expertise from members of the Transwestern family of companies specializing in development, real estate investment management and research. Transwestern has 34 U.S. offices and assists clients through more than 180 offices in 37 countries as part of a strategic alliance with BNP Paribas Real Estate. Experience Extraordinary at transwestern.com and @Transwestern.

Media Contact:
Stefanie Lewis
713.272.1266
[email protected]

SOURCE Transwestern