Investment and digital media advice

The 1,300 people who attended Thursday’s 25th annual VCU Real Estate Trends Conference in Richmond left with an overview on economics, affordable housing and a how-to on the best practices of social media.

The conference at the Greater Richmond Convention Center began with speaker Mary Ludgin saying the U.S. real estate market is well positioned despite global turbulence in other economies such as China. Ludgin, a managing director and director of global investment research for Heitman, noted that the U.S. doesn’t export much to China, with exports representing less than one percent of America’s GDP.  “So I don’t think China …  it represents something that will change the course of the U.S. economy in the near -or mid-term,” she said. 

Despite what she described as the “ho-hum, lackluster,” economy since the Great Recession, real estate has been doing well in part because slow growth has reined in over development.

“Over the last seven years real estate on an unleveraged basis has had total returns of more than 11 percent compared to a GDP of 2.7 percent,” Ludgin said.

A big part of that return, she added, “has been yields that have fallen, prices that have risen… There’s no seeming risks to that net operating income (NOI) growth in the near future.”

Job creation affects real estate, she noted, and it continues to lag in some parts of the country while it has been robust in others. For instance, since the prior peak before the recession, Richmond has increased its job base by 3.5 percent, or 19,420 new jobs, while Austin, Texas, has seen an increase of 28 percent, or 208,260 new jobs,

Ludgin looks for healthy long-term NOI growth across all property types. The apartment sector continues to be especially strong with rents continuing to increase despite many new projects. Richmond has seen apartment rental growth of about 2.7 percent ahead of inflation, despite new construction while Virginia Beach has seen growth of less than one percent. 

In terms of real estate investment, Ludgin told the audience there’s been a lot of demand in multifamily residential, self-storage, retail and warehouse distribution.

The office market continues to be slow in many parts of the country, with a national office vacancy rate of 13.4 percent compared to a rate of 7.7 percent for retail vacancy.  A lack of job creation and a trend by companies to use less space is crimping office growth.  “A shrinkage in the amount of space per worker. That has been an albatross around the neck of the office market recovery,” she said.

In real estate investment, “You have to hedge your risk. Focus on demographic trends and locational shifts … Build or buy senior housing, acquire student housing,  apartments. Seek out retail in emerging locations.  Look for locations where market share gains are going to happen.” 

While recession is not imminent, “we are closer to the end of the cycle than the beginning. Keep an eye on the clock. It doesn’t mean don’t buy, but if you have some regrets since 2006, it’s time to act on those regrets now.” 

It’s also time to make effective use of digital media, Erik Qualman said.

Qualman, the author of Socialnomics, took the stage in bright green glasses and went through a series of video examples to drive home the power of social media and how it can boost a company’s business. 

Qualman defined socialnomics as “word of mouth on digital steroids or world of mouth if you think of the global impact it can have.  This shift isn’t going to go away,” he said.

The good news, he added, is that people don’t have to be on all forms of social media – Linked In, Facebook, Instagram, etc. to be effective.

“It’s a balance between offline and on line. These tools aren’t designed to replace face to face. I could be up on Skype, and it wouldn’t be the same thing.” In all business, “the face-to-face piece is huge. These tools are to augment when time and distance are an issue.  They’re there to deepen a relationship. “

Such tools can be powerful. Qualman told of one entrepreneur, Gary Vaynerchuk, who grew his wine business by posting a video on YouTube called Wine Library TV, in which Vaynerchuk samples and talks about wine. “He wasn’t a tech person. He’s a sales guy.” In two years, Qualman said, “he goes from selling $4 million to $50 million worth of wine. The video is to start a conversation.”

In another conference session, Virginia Secretary of Commerce and Trade Maurice Jones, joined forces with Michael Rubinger, the CEO of a national nonprofit, to talk about affordable housing. 

Virginia has worked to improve its stock of affordable housing because it complements economic development and gives people places where they can live and, in many cases, be close to centers of employment.

Rubinger, president and CEO of Local Initiatives Support Corp., which helps transform distressed, low-income communities into sustainable neighborhoods, said that out of its 31 offices across the country, the Richmond office was the No. 2 generator of affordable housing loans last year.