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Commercial real estate will face some headwinds this year with the economic uncertainties that stem from President Donald Trump’s policies and talks of overpriced property valuations and the industry reaching its cyclical peak.
But a 2017 KPMG real estate outlook survey maintains that despite the uncertainties ahead, real estate should sustain momentum throughout the year. Below are several ways industry execs can prepare, according to KPMG experts.
1. Remain Competitive By Leveraging Technology
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If you have been paying attention, you will notice that technology is a key driver in every sector of the industry, forcing players to invest millions in tech advancements to remain up-to-date. This industry disruptor is fast-changing and constantly advancing — if executives don’t stay on top of this tech, they can quickly fall out of the game. This means investing in the cloud and mobile and social tech to connect quickly and transparently with everyone involved in a transaction — from brokers to tenants and buyers. Smart buildings will continue to gain momentum, as will nontraditional office environments — and investment in data analytics to track the success of a property has increasingly become a priority for landlords.
2. Prepare For What’s Certain To Come
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Many CRE experts initially forecast a strong economic outlook considering Trump’s plans to cut corporate taxes, boost infrastructure spending and cut financial regulations. But long-term economic predictions have become blurry amid the president’s push for trade and immigration reform. What is certain is the Federal Reserve’s plan to boost interest rates this year, likely moving rates a quarter of a percent three times this year. How will these hikes impact investment, long-term fundamentals and the yield of your portfolio? KPMG experts recommend setting aside time and money for R&D to prepare for these disruptors and how they’ll impact business one, five and 10 years ahead. It is all about being prepared to react quickly to change.
3. Remain Open To Private Lenders
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Though Trump is pushing for financial deregulation — even signing an executive action to develop a framework to revamp the 2010 Dodd-Frank financial-overhaul law — banks are still tightening commercial lending in an effort to remain compliant with regulations. Nontraditional lenders have stepped up to the plate, ramping up their commercial lending in recent years and putting added pressure on banks. The firms typically receive large cash flows from clients that allow them to make these loans available. KPMG experts said these institutional investors will likely be more willing to fund a riskier project.
4. Diversify Your Talent
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Diversity is key in every market, and such is the case for the commercial real estate industry. Research shows hiring talent from different backgrounds, financial brackets and underrepresented groups is good for business. Though the labor market is tight and qualified talent grows scarce, the latest jobs report showed an increase in Americans returning to the workforce, with unemployment inching up 4.8% in January. Industry leaders should look for talented women and minorities to train, mentor and promote to decision-making roles, according to KPMG.
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