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Presented by Christopher Lee CEL & Associates, Inc.

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1 Presented by Christopher Lee CEL & Associates, Inc.

2 Future Headlines Real Estate Industrys Megashifts The Psychology of Real Estate Real Estate Cycles Transformational Leadership Predictions CEL & Associates, Inc. 2

3 FUTURE HEADLINES CEL & Associates, Inc. 3

4 Tuesday, July 10, 2015Daily $1.75 Today's Highlights NYC Office eBay Becomes The #1 Source For Selling Real Estate CEL & Associates, Inc. 4

5 Congress Passes National Building Codes Standards Making It Unlawful To Sell A Building That Is Non-Compliant! Monday, February 18, 2015Daily $1.50 Today's Highlights NYC Office CEL & Associates, Inc. 5

6 Tuesday, July 10, 2018Daily $1.75 Today's Highlights Multifamily First Apartment Building Leased Up Using Social Media CEL & Associates, Inc. 6

7 Monday, February 18, 2016Daily $2.50 Today's Highlights Office Facebook Creates First Virtual Office Y Generation Declares Office Space Obsolete. CEL & Associates, Inc. 7

8 First High Rise Farm Announced 12 Stories Equal To 600 Acres Monday, February 18, 2015Daily 1.25¢ Today's Highlights NYC Office CEL & Associates, Inc. 8

9 REAL ESTATE INDUSTRYS MEGASHIFTS CEL & Associates, Inc. 9

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15 THE PSYCHOLOGY OF REAL ESTATE CEL & Associates, Inc. 15

16 CEL & Associates, Inc % of Americans now say that they are in the lower class. (Pew Research 9/10/12) 53% of Americans have 3 months or less of savings. (Yahoo Finance 8/29/12) Only 38% of Americans say that they are better off than a year ago. (Gallup 10/25/12) 54% of Americans expect a recession in (Rasmussen 12/27/12) 53% of Americans think the economy is getting worse. (Gallup 1/15/13) 50% of Americans believe the best years in America are in the past. (Gallup 1/2/13) Only 5% of U.S. voters think Congress is doing a good or excellent job. (Rasmussen 12/30/12)

17 Uncertain Hesitant Worried Stressed Unsure Cautious Insecure Dubious Unsettled Wavering Unpredictable Careful CEL & Associates, Inc. 17

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19 CEL & Associates, Inc. 19 Source: CEL & Associates, Inc.

20 CEL & Associates, Inc. 20 Source: CEL & Associates, Inc.

21 CEL & Associates, Inc. 21 Source: CEL & Associates, Inc.

22 A PSYCHOLOGICAL PROOF POINT MULTIFAMILY CEL & Associates, Inc. 22

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24 CEL & Associates, Inc. 24 Source: Census Bureau, Mortgage Bankers Association and A. Gary Shilling & Co. Last Points 1Q 2012: total 65.4%; ex past due 60.4%.

25 CEL & Associates, Inc. 25

26 CEL & Associates, Inc. 26 Source: Census Bureau and A. Gary Shilling & Co. Last Points 2011: at parents 14.2%; homeowners 37.8%.

27 CEL & Associates, Inc. 27

28 CEL & Associates, Inc. 28 Source: CBRE-EA and RREEF Real Estate. As of March 2012.

29 REAL ESTATE CYCLES CEL & Associates, Inc. 29

30 Transition Phase Growth Phase Plateau Phase Crisis Phase Transition Phase 10 Years 12.5 Years 4 Years Source: CEL & Associates, Inc. CEL & Associates, Inc. 30

31 Generally last 10 years. Growth period starts on the number 3. Cycle generally ends on the number 8. Can be altered by government intervention. Are not geographically uniform. Are not consistent with property types. All real estate cycles have names. Source: CEL & Associates, Inc. CEL & Associates, Inc. 31

32 Time PeriodCycle Age of Awakening Boomers & Entrepreneurism CEL & Associates, Inc. 32

33 Time PeriodCycle Age of Awakening Boomers & Entrepreneurism Age of Technology & Start-Ups CEL & Associates, Inc. 33

34 Time PeriodCycle Age of Awakening Boomers & Entrepreneurism Age of Technology & Start-Ups Age of Exuberance & Debt CEL & Associates, Inc. 34

35 Time PeriodCycle Age of Awakening Boomers & Entrepreneurism Age of Technology & Start-Ups Age of Exuberance & Debt Age of Consequence & Restructuring CEL & Associates, Inc. 35

36 Time PeriodCycle Age of Awakening Boomers & Entrepreneurism Age of Technology & Start-Ups Age of Exuberance & Debt Age of Consequence & Restructuring Age of Globalization & Knowledge Source: CEL & Associates., Inc. CEL & Associates, Inc. 36

37 PERIOD OF OPPORTUNITY Transition Phase Growth Phase Plateau Phase Crisis Phase Transition Phase 10 Years 12.5 Years Period Of Opportunity Rising Occupancy Levels Rising Rents Growing NOIs Increasing Asset Values Accelerated Development Activity Readily Available Capital New Competitors/Firms Emerge Source: CEL & Associates, Inc. CEL & Associates, Inc. 37

38 PERIOD OF DECISIONS Transition Phase Growth Phase Plateau Phase Crisis Phase Transition Phase 10 Years 12.5 Years Period Of Decisions Supply/Demand Imbalance Optimistic Underwriting Generous TIs/Rent Concessions Unrealistic Asset Values Protracted Negotiations Blind Entrepreneurism High Investment Sales Activity Source: CEL & Associates, Inc. CEL & Associates, Inc. 38

39 Transition Phase Growth Phase Plateau Phase Crisis Phase Transition Phase 10 Years 12.5 Years Period Of Change Declining Rents/Occupancies Declining Asset Values Little/No Development Activity Workouts/Restructuring Limited Access To Credit Entity Downsizing De-Leveraging PERIOD OF CHANGE Source: CEL & Associates, Inc. CEL & Associates, Inc. 39

40 PERIOD OF REINVENTION Transition Phase Growth Phase Plateau Phase Crisis Phase Transition Phase 10 Years 12.5 Years Period Of Reinvention New Business Models Emerge Recapitalization/Cash Is King Diversification Of Risk Focus On Fundamentals Next Generation Leaders Emerge Renewed Customer Focus Consolidation Accelerates Source: CEL & Associates, Inc. CEL & Associates, Inc. 40

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43 Source: CEL & Associates, Inc. CEL & Associates, Inc. 43

44 REAL ESTATE CYCLE PROOF POINTS CEL & Associates, Inc. 44

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52 So…What Core Strategy Do You Need To Embrace To Capitalize On The Emerging Opportunities? CEL & Associates, Inc. 52

53 TRANSFORMATIONAL LEADERSHIP ! CEL & Associates, Inc. 53

54 CEL & Associates, Inc. 54

55 Source: CEL & Associates, Inc. Human Capital Customer Relationships Brand Management Business Model Innovation Growth Strategy Execution Capital Access/Formation Controlling Costs Managing Corp. G & A Successor Planning Greening CEL & Associates, Inc. 55

56 Set Your Vision & Reset Your Priorities. CEL & Associates, Inc. 56

57 Set Your Vision & Reset Your Priorities. Implement A Collaborative Business Model. CEL & Associates, Inc. 57

58 Set Your Vision & Reset Your Priorities. Implement A Collaborative Business Model. Strengthen Your Brand & Differentiating Story. CEL & Associates, Inc. 58

59 Set Your Vision & Reset Your Priorities. Implement A Collaborative Business Model. Strengthen Your Brand & Differentiating Story. Become Customer-Centric & Knowledge-Driven. CEL & Associates, Inc. 59

60 Set Your Vision & Reset Your Priorities. Implement A Collaborative Business Model. Strengthen Your Brand & Differentiating Story. Become Customer-Centric & Knowledge-Driven. Improve Internal Systems & Processes. CEL & Associates, Inc. 60

61 Set Your Vision & Reset Your Priorities. Implement A Collaborative Business Model. Strengthen Your Brand & Differentiating Story. Become Customer-Centric & Knowledge-Driven. Improve Internal Systems & Processes. Take Advantage Of Competitor Difficulties. CEL & Associates, Inc. 61

62 Set Your Vision & Reset Your Priorities. Implement A Collaborative Business Model. Strengthen Your Brand & Differentiating Story. Become Customer-Centric & Knowledge-Driven. Improve Internal Systems & Processes. Take Advantage Of Competitor Difficulties. Recognize Opportunities & Pursue Them Aggressively. CEL & Associates, Inc. 62

63 Set Your Vision & Reset Your Priorities. Implement A Collaborative Business Model. Strengthen Your Brand & Differentiating Story. Become Customer-Centric & Knowledge-Driven. Improve Internal Systems & Processes. Take Advantage Of Competitor Difficulties. Recognize Opportunities & Pursue Them Aggressively. Expand Your Service Lines & Product Specialization. CEL & Associates, Inc. 63

64 Set Your Vision & Reset Your Priorities. Implement A Collaborative Business Model. Strengthen Your Brand & Differentiating Story. Become Customer-Centric & Knowledge-Driven. Improve Internal Systems & Processes. Take Advantage Of Competitor Difficulties. Recognize Opportunities & Pursue Them Aggressively. Expand Your Service Lines & Product Specialization. Strengthen Your Capital Base. CEL & Associates, Inc. 64

65 Set Your Vision & Reset Your Priorities. Implement A Collaborative Business Model. Strengthen Your Brand & Differentiating Story. Become Customer-Centric & Knowledge-Driven. Improve Internal Systems & Processes. Take Advantage Of Competitor Difficulties. Recognize Opportunities & Pursue Them Aggressively. Expand Your Service Lines & Product Specialization. Strengthen Your Capital Base. Protect Your Most Valuable Asset…Your People. CEL & Associates, Inc. 65

66 REAL ESTATE PREDICTIONS CEL & Associates, Inc. 66

67 Will function more like Marriott and operate like Sabre. The amount of office space per worker could shrink to 50sf – 75sf, and 25% of workers will be Club employees. Office buildings will shift from 8 to 6 to 24/7 activity centers. My Place will replace My Space as workers seek opportunities to create virtual offices, connective portals and swarming venues. Office space will be leased by units of consumption rather than square footage. Future leasing decisions will be made by the Director of Human Resources to reduce growing generational conflicts and enhance worker productivity. Moveable, intelligent walls will replace fixed offices. Windows will have electro-chromic glass which turn them into multi-touch screens. Pop-Up workplace cubicles, exercise and/or ergonomic office furniture and pink noise systems will be commonplace. CEL & Associates, Inc. 67

68 Will look like Amazon.com and operate like FedEx. Greater use of RFID or Smart Tags. TSA and U.S. Customs will move to the point-of-origin instead of the point-of-destination. Will employ more technology specialists than laborers. Improved robotics will continue to accelerate on-shoring. Manufacturing is back! The 2014 completion for the widening of the Panama Canal will shift port activity away from the west coast. Industrial buildings will be valued on building efficiency ratings or turnaround time. Growth around airports and major transportation hubs will continue as new regional distribution centers populate growth markets. CEL & Associates, Inc. 68

69 Will look more like Disneyland and feel more like eBay. Grocery stores will become a community resource for healthcare meetings, learning, banking, personal services and social interaction (e.g. the Grocery Mall). U.S. consumers will shift and become digital or device shoppers. There will be a proliferation of identity products. Retail design will feature smaller, adaptable and interactive elements to engage. An Age Zone of floor space will emerge. Organic and buy local initiatives will abound. Lifestyle retail will spur an underground economy. Sharing retailers will occupy many centers. Amazon will become the #1 grocer in America. Will money be relevant? CEL & Associates, Inc. 69

70 Will look more like a home but feel like a village. Smaller units (400 square feet), common area amenities and green features will dominate design and development activities. Custom options for interior finishes and features…design-your-own will be commonplace. Cohabitation will increase by 35% - 45%. Over 50% of apartments will be smoke-free, and 20% could be celebrity branded. Over 35% of apartment buildings will be identified with a local charity or community service. Watch for transferrable leases and pre-fab construction. Watch for the acquisition of major national and/or regional apartment portfolios/companies by lodging enterprises. Dedicated parking spaces for ZipCar-like providers and community bicycles for resident use. CEL & Associates, Inc. 70

71 Will look more like NASA but feel more like a partnership. Real estate assets for sale will have Standard Underwriting packages prepared by Certified Underwriters. Investment Sales activity will increase 12% - 14% per annum through An abundance of capital will likely keep cap rates low through Watch for the Federal government to enact Greening legislation requiring buyers of real estate assets to escrow monies for energy efficient improvements. Emergence of an e-Bay or MLS-like listing service for commercial assets. 50% of the Brokers employed today will be replaced by collaborative Analysts and Advisors. CEL & Associates, Inc. 71

72 The number of public real estate firms will decline by 35% - 45%. Of the regional/local real estate service firms which existed in 2012…30% will disappear by There will be 3 Global real estate providers. Todays functional titles will be replaced by contemporary monikers. The titles of Property Manager or Facility Manager will disappear. Bilingual requirements will be mandatory among service providers. Every service provider will have at least one Certification or approved Designation. There will be a public market for individual asset investing. CEL & Associates, Inc. 72

73 Presented by Christopher Lee CEL & Associates, Inc.


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