WEBVTT - Hessam Nadji on Commercial Real Estate: Likes Dallas (Audio)

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<v Speaker 1>Broadcasting live to New York, Bloomberg eleventh, Rio to Washington,

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<v Speaker 1>d C. Bloomberg to Boston, Bloomberg Well unders to San Francisco,

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<v Speaker 1>Bloomberg nine to the Country Serious Exam General one nine

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<v Speaker 1>and around the globe the Bloomberg Radio plus Jappen Bloomberg

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<v Speaker 1>got gone. This is taking stock commercial real estate. Where

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<v Speaker 1>is this very important market heading. I'm Kathleen HAZELNG with

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<v Speaker 1>PIM Fox. We're gonna be speaking to the president and

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<v Speaker 1>CEO of Marcus and Miller Champions based in Encino, California,

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<v Speaker 1>for the largest brokerage firm in the country that specializes

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<v Speaker 1>in commercial real estate, and they see steady job growth

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<v Speaker 1>creating demand for both housing and commercial space. Pim and

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<v Speaker 1>I want to know a little bit more about the

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<v Speaker 1>choices that people make when they decide where to locate,

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<v Speaker 1>for example, urban centers, close knit communities, maybe over suburbs.

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<v Speaker 1>Will find out more, but right now, let's find out

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<v Speaker 1>all the business news from Charlie Pellett and the Bloomberg News.

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<v Speaker 1>All right, thank you very much, PIM, thank you, Kathleen,

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<v Speaker 1>The dal the SMP NEZDAC all advancing on this Friday,

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<v Speaker 1>May SMPT five hundred index rebounding from a seven week low,

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<v Speaker 1>and we are brought to you by Carbonite. You never

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<v Speaker 1>to get two three months with offer code broadcast. SMPT

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<v Speaker 1>five hundred index up fifteen points, a gain of eight

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<v Speaker 1>tenths of one percent, as DAK is up sixty one points,

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<v Speaker 1>a gain of one point three percent, and the down

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<v Speaker 1>Jones Industrial Average climbing now by ninety four points. It

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<v Speaker 1>is higher by five tenths of one percent. Applied Materials

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<v Speaker 1>surging today after its earnings beat estimates. Supply Materials up

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<v Speaker 1>thirteen point five percent, up to sixty eight to two

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<v Speaker 1>dollars and fifty nine cents. Michael O'Rourke is chief markets

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<v Speaker 1>out of just A Jones trading. On Bloomberg Television today,

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<v Speaker 1>he said, we may be looking at the start of

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<v Speaker 1>a bear market, and that's because of a lack of

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<v Speaker 1>new highs about three and a half percent from the

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<v Speaker 1>from the all time higher registered a year ago. And

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<v Speaker 1>you know time and price are key things in the

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<v Speaker 1>stock market, so what's working for the market right now

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<v Speaker 1>is prices held up. Obviously times working against us, and

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<v Speaker 1>what we have is a negative fundamental backdrop and of

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<v Speaker 1>course fed tightening and some decelerating data in the economy

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<v Speaker 1>that's keeping the market from breaking out. So the next

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<v Speaker 1>six months or so I think are going to be

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<v Speaker 1>pivotal because if you if you don't actively make that

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<v Speaker 1>new high, it becomes harder and harder as time goes on.

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<v Speaker 1>And gold down a dollar now a drop of point

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<v Speaker 1>one percent to thirty two on Wall Street. Now, let's

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<v Speaker 1>look at other news from around the world. Charlie thank

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<v Speaker 1>you from the Bloomberg news room, and Mark Crumpton. Three

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<v Speaker 1>European security officials say the passenger manifest for egypt Air

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<v Speaker 1>flight eight oh four contained no known names on current

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<v Speaker 1>terror watch lists. That's according to the Associated Press with

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<v Speaker 1>sites officials who were not authorized to speak about the

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<v Speaker 1>ongoing investigation. The passenger manifest was leaked online and has

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<v Speaker 1>not been officially verified by egypt Are. Flight eight oh

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<v Speaker 1>four was carrying sixty six people from Paris to Cairo Thursday,

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<v Speaker 1>when it's believed to have crashed. Officials say some wreckage

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<v Speaker 1>has been found, including human remains. Family members of those

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<v Speaker 1>who were on board a missing egypt Air flight gathered

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<v Speaker 1>in the Cairo Mosque today to pray for the victims,

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<v Speaker 1>many breaking into tears as they were in prayer. One

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<v Speaker 1>man with four relatives on the plane says it's very

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<v Speaker 1>hard for the family, and another says his family is

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<v Speaker 1>holding out hope their loved ones might still be alive.

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<v Speaker 1>Egyptian officials say it is not likely there are any

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<v Speaker 1>survivors Amy Morris, Bloomberg Radio Washington with or without symptoms.

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<v Speaker 1>The Zico virus is linked to birth defects. That warning

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<v Speaker 1>from federal officials today. President Obama's urging Congress to approve

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<v Speaker 1>the one point nine billion dollars he's asked for to

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<v Speaker 1>fight the mosquito boy and virus. This is not something

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<v Speaker 1>where we can build a wall to prevent mosquitoes and

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<v Speaker 1>don't go through customers. The agency that owns the World

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<v Speaker 1>Trade Center has reached a deal to end a payment

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<v Speaker 1>dispute with a firm that worked on the site. The

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<v Speaker 1>Wall Street Journal reports the Port Authority will pay twelve

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<v Speaker 1>point three million to Colvino Construction Company. Global News twenty

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<v Speaker 1>four hours a day, powered by our hundred journalists in

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<v Speaker 1>more than one hundred fifty news bureaus around the world.

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<v Speaker 1>From the Bloomberg news Room by Mark Crumpton. Charlie, and

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<v Speaker 1>we thank you in this headline to pass along. Mexico

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<v Speaker 1>says l Chapo Guzman's extradition has been approved. SMP five

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<v Speaker 1>hundred index up fourteen points as we recap now the

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<v Speaker 1>SMP of two thousand fifty four, a gain of seven

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<v Speaker 1>tenths of one percent. I'm Charlie Pellaton. That's a Bloomberg

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<v Speaker 1>business flash. You're listening to taking stock with pin Box

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<v Speaker 1>and Kathleen News on Broomberg Radio. A new report by

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<v Speaker 1>the Real Estate Board of New York There's spring retail

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<v Speaker 1>report says that discounting is a theme, at least in

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<v Speaker 1>cities such as New York. While commercial real estate remains

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<v Speaker 1>fundamentally strong, there is a slowdown that is occurring both

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<v Speaker 1>at the national and in global marketplaces. Let's find out

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<v Speaker 1>more from Hassan Naji. He is the president and the

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<v Speaker 1>chief executive of Marcus Millichap based in Encino, California. Hassan,

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<v Speaker 1>thank you very much for being with us. Tell us

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<v Speaker 1>your view of the commercial real estate market today. Happy

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<v Speaker 1>to do it. Thanks for having me on the program.

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<v Speaker 1>Always good to be talking with you, PIM. The environment

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<v Speaker 1>for commercial real estate has been ideal in the in

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<v Speaker 1>the fact that we have steady job creation, but not

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<v Speaker 1>at a rate that is causing a lot of inflation,

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<v Speaker 1>which is given the feed a lot of flexibility. So

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<v Speaker 1>you have a combination of improving fundamentals on the supply

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<v Speaker 1>and demand of commercial real estate. Plenty of demand coming

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<v Speaker 1>in for office space, for apartments, for retail space, and

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<v Speaker 1>so on, occupying more and more space and paying higher

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<v Speaker 1>rents at a time when the valuations have been supported

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<v Speaker 1>by low interest rates, and so the yield of commercial

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<v Speaker 1>real estate has been compelling for the last several years

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<v Speaker 1>and remains very compelling in the average of the five

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<v Speaker 1>or seven percent nationally across the whole spectrum of commercial

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<v Speaker 1>real estate at a time of as you know, a

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<v Speaker 1>lot of our altility in the stock market and uncertainty elsewhere.

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<v Speaker 1>Some how much has the rising home prices in some

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<v Speaker 1>parts of California, as you well know, a large part

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<v Speaker 1>of the populationship priced out of home buying if you

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<v Speaker 1>look at their their income and debt to income ratios, etcetera.

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<v Speaker 1>More people renting more apartment buildings being built. How's that

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<v Speaker 1>played out for commercial real estate. It's been a very

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<v Speaker 1>favorable trend for apartments in that rental demand has been

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<v Speaker 1>at record levels for now several years, partially because of

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<v Speaker 1>the affordability that you're speaking to, and partially because of

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<v Speaker 1>consumers preference. You know, coming out of the financial crisis

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<v Speaker 1>and the severity of the housing crisis that we had

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<v Speaker 1>in two thousand and eight two thousand and nine, a

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<v Speaker 1>lot of people have a whole different view in terms

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<v Speaker 1>of looking at at a primary residence as an investment,

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<v Speaker 1>and so there has been a lot more caution among

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<v Speaker 1>especially among first time homebuyers, UH, the thirty and the

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<v Speaker 1>young forty somethings that would have normally bought a home

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<v Speaker 1>at that particular stage of their lives that are now

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<v Speaker 1>choosing to rent. And the apartment industry has been very

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<v Speaker 1>quick to respond to that extra demand by UH constructing

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<v Speaker 1>and designing the kind of product that the thirty something

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<v Speaker 1>really prefers, and the empty nester that's now selling a

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<v Speaker 1>home and UM preferring to rent in an urban environment

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<v Speaker 1>is beginning to show. So it's it's been a combination

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<v Speaker 1>of both the affordability issue and only a consumer preference

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<v Speaker 1>towards renting. I wonder if you could pick up on

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<v Speaker 1>that has some and US speak a little bit more

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<v Speaker 1>about this trend of people looking to live in urban

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<v Speaker 1>areas and how that is creating a tighter bond between

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<v Speaker 1>residential and commercial real estate them It's a very important

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<v Speaker 1>trend in that we really have observed over the last

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<v Speaker 1>twenty years the revitalization of so many downtown areas urban

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<v Speaker 1>areas beyond just creating a twenty four hour environment where

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<v Speaker 1>people want to work and live, it's become more than that.

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<v Speaker 1>It is now uh, really much more of a series

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<v Speaker 1>of amenities, both cultural and transportation oriented amenities and access

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<v Speaker 1>to different kinds of retail acts, different kinds of services

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<v Speaker 1>that have really free sprung back into urban areas that

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<v Speaker 1>we really hadn't seen for a long long time since

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<v Speaker 1>the suburban growth dominated basically the death nition of of

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<v Speaker 1>US US growth over many decades. This revitalization has created

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<v Speaker 1>the need for mixed use product when it comes to

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<v Speaker 1>real estate, So you're seeing a lot of residential being

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<v Speaker 1>built along with retail, along with um the kinds of

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<v Speaker 1>services that you would need in order to basically have

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<v Speaker 1>a safe, contained population within an urban area. The biggest

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<v Speaker 1>challenge is the education system. So when you're talking about

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<v Speaker 1>young adults, typically in their thirties, they're waiting longer to

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<v Speaker 1>get married, and those that are getting married or coupling

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<v Speaker 1>are waiting longer to have kids. So they're staying in

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<v Speaker 1>these basically revitalized downtown areas and really enjoying it. But

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<v Speaker 1>when it comes time to start a family, there is

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<v Speaker 1>still a major disadvantage in the urban areas when you

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<v Speaker 1>talk about schooling and the cost of private school versus

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<v Speaker 1>the quality of public schools. And that's where we're still

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<v Speaker 1>seeing a young families begin to move into the suburban area.

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<v Speaker 1>And if you can even afford a them in one

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<v Speaker 1>of these areas, a lot of your kids. The prices

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<v Speaker 1>have gone up so much, right, But quick final question,

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<v Speaker 1>where are this? Where's this? A couple of sweet spots

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<v Speaker 1>for people who want to invest in commercial real estate.

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<v Speaker 1>You've got about twenty seconds. Great. I would look at

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<v Speaker 1>Dallas because, unlike Houston, it's still adding a lot of jobs.

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<v Speaker 1>I would look at Atlanta and Phoenix as a recovery

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<v Speaker 1>markets from the lower risk uh basically lower yield but

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<v Speaker 1>lower risk markets the San Francisco Bay Area, Los Angeles,

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<v Speaker 1>New York and and the Boston area. San Francisco and

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<v Speaker 1>New York price down. I don't think they are because

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<v Speaker 1>their supply constrained and the yields are low for a reason. Okay, well,

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<v Speaker 1>you're giving us lots of interesting ideas as I'm Nagi,

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<v Speaker 1>thank you so much for joining us today, President and

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<v Speaker 1>CEO of Marcus and millichap uh. They are the largest

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<v Speaker 1>brokerage firm specializing in commercial real estate. I'm Kathleen Hazel

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<v Speaker 1>and pim Fox taking Stock on bloom Brig Radio. Bloomberg

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<v Speaker 1>Taking Stock is brought to by Audi Medalands in Secaucus,

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