by Alex Catalano
Both investors and developers in the US property market will have to exercise “selectivity and discretion” in 1986, according to the real estate market forecast produced by Landauer Associates.
Although the last few years’ building boom has left most cities in the US amply, if not over, supplied, “the seeds of a major shakeout are not evident in 1986”, according to Landauer, the US end of Hillier Parker. Instead, “the squeeze will be on in terms of the developer losing his equity position in properties to his co-venturer, the lender/equity participant”.
“The real shakeout is more likely to occur in mid-1987”, and could be triggered by continuing oversupply combined with a major recession like that of 1973-75 or 1981-82, the report says.
Landauer recommend investors to “lighten” their portfolios by about 15%, to take advantage of relatively high prices before the slump.
But, as the report stresses, there will still be good investment opportunities in 1986. Shopping centres and planned light industrial parks get the thumbs up, along with rental housing outside “radicalised” cities like Boston, New York and Los Angeles, which are prone to rent controls.
Conversely, offices and hotels are out of favour. Landauer point out that most office markets outside the Atlantic Coast and near Midwest are severely oversupplied and could take years to return to their previous equilibrium.
The report includes a new series of office and retail indices meant to give investors and developers “a more precise concept of where opportunities exist”.
The “momentum index” for offices identifies Washington DC as the “average” market; Chicago, Philadelphia and New York head the league in terms of their prospects. On the down side, Dallas, Orlando and Boston are considered to have worse risks than Houston, Atlanta and Denver.
