WEBVTT - Avison Young's Kevill: Urbanization Causes Rental Growth(Audio)

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<v Speaker 1>Broadcasting live to New York, Bloomberg even to Washington, d C.

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<v Speaker 1>Bloomber to Boston, Bloomberg twelve to San Francisco, Bloomberg nine

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<v Speaker 1>to the country and around the globe the Bloomberg Radio

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<v Speaker 1>and Bloomberg Got Gone. Is taking Stock? Coming up on

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<v Speaker 1>taking Stock, we're gonna be speaking with John Kevil. He

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<v Speaker 1>is a principal and managing director of US Capital Markets

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<v Speaker 1>for Avason Young. What is Avinson Young? They are a

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<v Speaker 1>real estate broker and he's got details about the commercial

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<v Speaker 1>real estate market in our nation's capital. We've got all

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<v Speaker 1>the details coming up. But right now, let's go to

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<v Speaker 1>Charlie Pellett and the Bloomberg newsroom for a Bloomberg Business Flash.

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<v Speaker 1>I thank you very much, Pim Fox Nan stack of

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<v Speaker 1>a record now fifty two sixty six, up twenty one points.

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<v Speaker 1>Again there of four tenths of one percent. The dollar

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<v Speaker 1>is falling after mixed economic day today. That is bolsterring

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<v Speaker 1>speculation the Federal Reserve of will be in no rush

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<v Speaker 1>to raise interest rates. Oil is rallying up seventy three

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<v Speaker 1>cents for fourteen of barrel right now on West Texas

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<v Speaker 1>Intermedia crewed up one and a half percent. Brent crude

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<v Speaker 1>up one point six percent, up seventy six cents ninety

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<v Speaker 1>two for a barrel of Brent natural gas hired by

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<v Speaker 1>two point eight percent now to seventy five per million

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<v Speaker 1>bt US down Industrial is up thirty five to eighteen thousand,

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<v Speaker 1>five hundred sixty five, a gain there of two tents

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<v Speaker 1>of one percent. The SMP up six to nine, a

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<v Speaker 1>gain of three tenths of one percent. People familiar with

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<v Speaker 1>the matter of state negotiations between Buyer and Montsanto are

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<v Speaker 1>advancing toward a deal after the company has made progress

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<v Speaker 1>on issues including the purchase price and termination feed. Jeff

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<v Speaker 1>McCracken is Managing editor for Global Mergers and Acquisitions at

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<v Speaker 1>Bloomberg News, and on the Bloomberg Advantage this morning, he

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<v Speaker 1>outlined the competitive landscape in that industry. What's been going

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<v Speaker 1>on in the agricam world is the bigest companies have

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<v Speaker 1>been merging. So last year we had Dowin DuPont come together,

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<v Speaker 1>and sometime perhaps later this year, that deal will get approved.

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<v Speaker 1>And those companies, once they come together, then they're going

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<v Speaker 1>to break of heart. They will come together and they

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<v Speaker 1>will put divisions like divisions if you will together and

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<v Speaker 1>then break into two or three companies. Purchases of new

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<v Speaker 1>homes unexpectedly jumped in July to the highest and almost

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<v Speaker 1>nine years, led by soaring demand in the South and

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<v Speaker 1>adding to signs of persistent housing market strength. Commerce Department

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<v Speaker 1>says sales increased twelve point four percent to a sixty

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<v Speaker 1>four thousand annualized pace, the fastest since October two thousand seven,

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

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<v Speaker 1>some of the other stories making news. Thank you Charlie

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<v Speaker 1>from the Bloomberg news room. I'm til Schneider. President Obama

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<v Speaker 1>spoke today after getting a first hand look at the

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<v Speaker 1>record flooding that has devastated parts of Louisiana. I come

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<v Speaker 1>here first and foremost to say that the prayers of

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<v Speaker 1>the entire nation are with everybody lost love. Uh, we

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<v Speaker 1>are heartbroken, but the loss of life. The flood damaged

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<v Speaker 1>tens of thousands of homes and killed thirteen people. Donald

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<v Speaker 1>Trump's Trump Tower is boosting the rent it charges to

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<v Speaker 1>one of its tenants, the Donald Trump campaign. The campaign

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<v Speaker 1>paid about thirty five thousand dollars a month for rent

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<v Speaker 1>and utilities until this April. The payment began increasing in

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<v Speaker 1>May and hit one seventy thousand dollars last month. Hillary

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<v Speaker 1>Clinton leads Donald Trump by sixteen points. In Virginia. The

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<v Speaker 1>Roano College Pole has Clinton with fifty and Trump thirty

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<v Speaker 1>six percent in a two way race. In an expanded pole,

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<v Speaker 1>Clinton leads forty eight percent to thirty two percent, with

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<v Speaker 1>Libertarian nominee Gary Johnson getting eight percent and the Green

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<v Speaker 1>Party's Jill Stein with three percent. It looks like private

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<v Speaker 1>lives are reportedly being exposed by Wiki leaks. Wiki leaks

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<v Speaker 1>quest to expose government secrets is costing the privacy of

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<v Speaker 1>hundreds of innocent people, including survivors of sexual abuse and

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<v Speaker 1>the mentally ill. That's according to the Associated Press a

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<v Speaker 1>P reports, in the past year, a low Wiki leaks

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<v Speaker 1>has published medical files belonging to scores of ordinary citizens,

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<v Speaker 1>while many hundreds more have had sensitive family, financial, or

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<v Speaker 1>identity records posted to the web. According to a P,

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<v Speaker 1>the site published the name of a Saudi citizen arrested

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<v Speaker 1>for being gay. In the Muslim kingdom, homosexuality is punishable

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<v Speaker 1>by depth. Michael Barr Bloomberg Radio Global News twenty four

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<v Speaker 1>hours a day, powered by more than journalists and analysts

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<v Speaker 1>in more than one twenty countries. I'm Jill Schneider and

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<v Speaker 1>this is Bloomberg Charlie, and we thank you and again

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<v Speaker 1>recapping the SMP five hundred index up six to nine,

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<v Speaker 1>a gain of three tents of one percent. Navstack trading

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<v Speaker 1>at a record of four tenths of one percent, downd

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<v Speaker 1>US reels up two tenths of one percent. I'm Charlie

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<v Speaker 1>Pellett and Pat's a Bloombred business flash. You're listening to

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<v Speaker 1>taking stock with Kathleen pim Fox on Bloomberg Radio. Commercial

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<v Speaker 1>real estate in our nation's capital. We've got an expert.

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<v Speaker 1>John Kevil is Principal Managing direct or if US Capital

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<v Speaker 1>Markets for Abison Young. He's based in Washington, d C. John,

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<v Speaker 1>thank you very much for being with us. Thank you, Pam.

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<v Speaker 1>Tell us a little bit about your company, about Avison Young,

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<v Speaker 1>because you're based in Toronto, but you have lots of

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<v Speaker 1>experience in the DC market. You've executed more than twenty

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<v Speaker 1>five billion dollars worth of transactions over your nearly quarter

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<v Speaker 1>century career. Well, Avison Young is Toronto based and in

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<v Speaker 1>the US we're Chicago based, and then we're we're the

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<v Speaker 1>largest the fastest growing real estate services firm in in

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<v Speaker 1>the country. We've gone from four n people just four

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<v Speaker 1>years ago to nearly three thousand people. And we've done

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<v Speaker 1>that through requiring acquiring companies, acquiring and keep people, and

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<v Speaker 1>really focusing on on high levels of client service and

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<v Speaker 1>markets across the country. We're in seventy markets globally, including Canada, Mexico, Germany,

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<v Speaker 1>the UK, and UH and we're continually growing. So tell

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<v Speaker 1>all right, so tell us about some of that. I

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<v Speaker 1>know you've broken uh seven real deals in Washington, d C.

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<v Speaker 1>And UH, we'll tell us about two of them in particular.

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<v Speaker 1>I know that those are regarded as some of the

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<v Speaker 1>largest deals ever well in in Washington. I think the

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<v Speaker 1>is an interesting market right now. UM, we're we're a

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<v Speaker 1>little bit lower on the on the scale and the

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<v Speaker 1>attractiveness scale for global investment than we typically have been.

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<v Speaker 1>And that's that's Um, that's I think largely due to

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<v Speaker 1>the fact that the federal government has not been in

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<v Speaker 1>sort of a growth on mode over the last few years. Uh.

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<v Speaker 1>That being said, what we've seen is not that not

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<v Speaker 1>necessarily the largest deals, but some of the most interesting deals.

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<v Speaker 1>I've been on our deals where are quite frankly, some

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<v Speaker 1>of the smaller deals, some of the deals where we've

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<v Speaker 1>seen the urbanization trends that we're seeing across the area

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<v Speaker 1>take route and office investors are increasingly looking to live, work,

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<v Speaker 1>play environments where where the firms that our tenants in

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<v Speaker 1>the buildings UM, the buildings are close to where people live,

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<v Speaker 1>where people play and UM, and those buildings become sort

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<v Speaker 1>of more of a part of the fabric of the tendency.

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<v Speaker 1>And and therefore the tenants are more more prone to

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<v Speaker 1>staying there, and and and you see higher rental growth,

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<v Speaker 1>and those tend to be the investments that people can

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<v Speaker 1>make sense of a little bit better right now than

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<v Speaker 1>than those that we rely on the pure sort of

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<v Speaker 1>economic growth on the back of our traditional demand generators,

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<v Speaker 1>which have been the government and law firms and contractors.

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<v Speaker 1>Now we're just going to really point to one particular deal.

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<v Speaker 1>This was the one inteen five five five twelfth Street

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<v Speaker 1>Northwest that was a nearly five hundred million dollar deal

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<v Speaker 1>going for six hundred and thirty five dollars a square foot.

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<v Speaker 1>Can you tell us what does prime business commercial space

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<v Speaker 1>rent for or sell for right now in Washington, d C? Well,

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<v Speaker 1>right now that the best indicator of the prime space

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<v Speaker 1>is not necessarily the price per square foot, but more

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<v Speaker 1>to cap right that investors are willing to pay UM.

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<v Speaker 1>I would say that for prime trophy rental in downtown

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<v Speaker 1>d C right now, someone would buy that first, say

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<v Speaker 1>a three three and a half percent cap rate, assuming

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<v Speaker 1>that there's some some level of growth implied in the

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<v Speaker 1>rent based on who the tendency is. UH, stabilized cap

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<v Speaker 1>rates would be a little bit higher in that particular case.

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<v Speaker 1>That was a deal that was a full city block

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<v Speaker 1>in downtown d C. And that's the sort of investment

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<v Speaker 1>that gets global attention, UH. And that was that was

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<v Speaker 1>really the key there. The the global attention that that

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<v Speaker 1>asset received in the market because of its size and

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<v Speaker 1>because of its location in a gateway city almost transcends Washington,

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<v Speaker 1>d C. And really is an indicator of how attractive

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<v Speaker 1>it is to put major amounts of capital to work

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<v Speaker 1>in in gateway cities across the US. And just to

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<v Speaker 1>do the quick definition of cap rate, it's the ratio

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<v Speaker 1>of net operating income to property asset value. Tell us

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<v Speaker 1>a little bit about the expansion of infrastructure in Washington.

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<v Speaker 1>I keep thinking, for example of the Metro, which is

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<v Speaker 1>the second biggest UH public transport system in the US.

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<v Speaker 1>For example, the the expansion of the Silver Line. How's

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<v Speaker 1>that changing commercial real estate? Well, what you're seeing on

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<v Speaker 1>the Silver Line in particular is is real estate investment

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<v Speaker 1>is occurring around mass transportation around the country. And I

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<v Speaker 1>think that's that's one of the that's one of the

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<v Speaker 1>key drivers in this region. So investors from from outside

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<v Speaker 1>the market and inside the market are focusing on where

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<v Speaker 1>people want to live, where people can office, and where

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<v Speaker 1>people can get around the region without cars, and and

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<v Speaker 1>so that's leading to dense development around metro's and that's

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<v Speaker 1>where we that's where investors for sea run growth and

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<v Speaker 1>so that makes that that that that makes those investments

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<v Speaker 1>more attractive. And I think you're seeing more and more

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<v Speaker 1>capital um wanting to pay up to be around Silver

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<v Speaker 1>Line metros. And you see it through Tyson's Corner, you

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<v Speaker 1>see it out, and you see it out and resting

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<v Speaker 1>in Herndon, and certainly you've seen it for a long

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<v Speaker 1>time the Rose and Boston Quarter locally. Just last point

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<v Speaker 1>to make the distinction for us between rental growth and

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<v Speaker 1>asset types, because that's not necessarily what you think of

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<v Speaker 1>when you think institutional assets, is it um I'm not

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<v Speaker 1>social leading to rental growth, business trends leading to rental growth,

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<v Speaker 1>and asset types that are not typically thought of as

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<v Speaker 1>true institutional assets. Right, So I think, what what? What?

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<v Speaker 1>What people have looked at? And you need to find

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<v Speaker 1>cap rate a little while ago, and I think what

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<v Speaker 1>what Many institutional investors have come to the conclusion that

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<v Speaker 1>for the most part, pure cap rate compression has has stabilized,

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<v Speaker 1>and they're going to get there. They're going to get

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<v Speaker 1>their investment growth based on uh demographic increase, in demographic

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<v Speaker 1>growth and the urbanization trends, and that's where where their

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<v Speaker 1>urbanization is occurring. That's where you're gonna see rental growth.

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<v Speaker 1>And I think that's where I leave it there. John Kevil, Principle,

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<v Speaker 1>Managing director US capital Markets for Avaston Young. This is

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<v Speaker 1>Bloomberg coming up Von Bloomberg taking stock. We're going to

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<v Speaker 1>take stock of a potential deal Monsanto Bayer. Will the

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<v Speaker 1>deal come together for these two giant agrichemical companies. Details ahead.