The Terrible Twos and Solving The New Economic Puzzle

The crowd always snaps to attention when BOMA International President and COO Henry Chamberlain takes the stage and begins his "State of the Industry" talk. At this past June’s convention, there was no exception.

In a far-ranging talk, Henry noted that while recent surveys had shown the mood of general optimism continued, the impact of Brexit—which was still very much in the news at the time of the convention—and tighter debt markets, were starting to create some uncertainty. Speaking before the international crowd, he noted that generally, Class A building stock was still performing well, but world-wide, Class B real estate was experiencing a slight depreciation in value.

The market will close out the year, Henry predicted, in the "Terrible Twos," estimating that the GDP will post only modest growth at 2%, interest rates will be at 2% and inflation will climb from 1% to 2%. Unemployment still remains below 5%, but the outlook for job creation remains uncertain.

With real estate now very much a tenant’s market—witness the popularity of WeWork, Liquid Space and Regus--Henry pointed to technology as one of the key drivers behind the alternate office space business model of these firms, and their ability to offer flexibility, service and amenities for next generation tenants. Look to firms like Apple and Comcast, he suggested, and see how they are shaping the real estate market globally.

As to the overall future, he characterized it as a puzzle wrapped in a learning experience, asking "How do we learn from this configuration and what tenants are looking for?" He concluded, "We're all students."