It’s more than a year away, but mark February 26, 2020 on your calendar. That is the day of the next Urban Land Institute Trends Day at the JW Marriott Phoenix Desert Ridge resort. That is a day you can’t miss if you’re interested in what’s going on in the commercial real estate industry.
Friday, Feb. 25 was my first Trends Day and as I reflect back on the event (the 2019 theme was Reflect. Rethink. Respond.), there are several things that I heard during a very insightful day that stuck with me.
The highlights of he event were many, starting with Tulane University professor Peter Ricchiuti’s enjoyable presentation on the current state of the economy in the U.S. and ending with a lively breakdown of the day from Meyers Research managing principal Timothy Sullivan and Arizona Republic reporter Catherine Reagor.
Ricchiuti gave a quick-moving, light-hearted, but thorough examination of our economy during his presentation. A couple notable takeaways were the future issues that face the oil industry in the U.S., the direction that the federal deficit is going and how much money corporations are keeping on the sidelines. Ricchiuti cited the abundant shale production in the U.S. as a short-term obstacle for the oil industry and the rise in alternative fuels and electric cars as long-term challenges. Transportation accounts for 70-percent of oil usage. As more and more electric cars hit the market and internal combustion engines are being phased out, oil prices will continue to fall.
Ricchiuti noted a couple troublesome economic trends. He showed that at the current pace, our federal deficit as a percentage of GDP will be 111-percent by 2027, thanks greatly to the $5.5 trillion tax cut given in 2017. Also, the federal net interest payments as a percentage of GDP is on a sharp, upward trajectory that could spell trouble in the future. He countered some of the negative sounding economic trends with some positive ones, at least as far as corporations are concerned. S&P 500 companies saw record earnings in 2018 and those earnings are projected to be even bigger in 2019. Corporate profits are up more than 120 fold since World War II and stock prices have risen 180 fold, providing solid financial footing for our nation’s larges companies.
But, he showed that record earnings has not resulted in investing in new plants or hiring new workers to keep pace with the growth. In fact, U.S. corporations are holding onto about $2 trillion and keeping that money on the sidelines and another $2.5 trillion in overseas accounts.
He summed up things by theorizing that our economic cycle is in “extra innings” and is the second longest growth cycle on record. He expects 2019 to be another solid year, but 2020 could mark the start of things taking a turn.
One of the more notable things to come out of the panel discussions during Trends Day came from Patricia Watts, senior partner and director of planning for Deco Communities, a multifamily company in the Valley that most recently completed the Edison Midtown condominium project at 3131 N. Central Ave.
Watts noted that Deco is currently in the development process for five new projects that would be considered “workforce housing” in Phoenix. This is currently a very under-served segment in Arizona. In the past two years, the percentage of luxury multifamily projects being built in the Phoenix market was 97 percent. Those properties typically start out at $1,300-$1,500 a month for rent, which is a very high price for new renters or working families. The projects that Deco mentioned would be closer to the $1,000-a-month category, putting affordable housing in range for more people who work in the central part of the city.
The keynote presentation was by Vihn Giang, a self-made magician, entrepreneur and speaker who showed the crowd the power of perspective and how different perspectives, when brought together, produces innovation. Giang provided the attendees with a thought-provoking, funny presentation that made everyone think about the five people they spend the majority of their time with. He theorized that each person is a direct reflection of the five people they spend the most time with, stressing how vital it is that we spend time with the kind of people we want to be.
Another highlight from the day came from seeing a vibrant Debra Sydenham, executive director for ULI Arizona, in her element, both on stage and off. Sydenham presented the ULI highlights for the year and kept the event moving, with a generous amount of help from the rest of the ULI team and Trends Day committee, which are too numerous to mention all of them.
The final word came from ULA Arizona District Council chair Charley Freericks, senior Vice President of Catellus. Freericks’ remarks were short and sweet and marked his final year as council chair.
For those that want to get a sense of what Trends Day had to offer this year, many of the presentations are available here at the ULI Arizona website.