At the Fuse Alliance annual conference, Mark Bischoff, senior vice president healthcare and senior living at Mohawk Group, provided members with a helpful list of research sources and economic indicators that his team uses to help project where to invest their resources. The same data points may be helpful to commercial flooring businesses who want some fresh perspective for their strategic planning.
One of his first tips is to plan for sector rotation based on the cycles. The investment management firm Jones Lang LaSalle (us.jll.com) has a savvy set of charts called property clocks that show which markets are rising, falling or somewhere in between. The clocks cover five sectors, including office, industrial, multifamily, retail and skyline. A market’s position on the clock is determined by a combination of vacancy, demand, construction and rental rates. The left side is favorable with higher supply and demand, while the right side indicates markets where demand is waning. The office property clock is showing opportunity in 2018 for office properties in New Jersey, Cincinnati, Cleveland and Detroit, which are on the rise, while Houston’s office market is beginning to bottom. “We watch this pretty closely, and it’s actionable by market,” Bischoff said.
Commercial real estate brokers Cushman & Wakefield offers some helpful data on commercial vacancy rates. “Typically, when vacancy rates get to 15% people stop building,” Bischoff said. “It becomes less of an attractive investment to build new.” While businesses may see a bubble in remodeling for a short period of time, the data is showing that we are right on the edge of a decline with commercial office at 14% vacancy rates.
Also, according to Cushman Wakefield, retail is currently showing a vacancy rate of just 7%, which is interesting given pressure from ecommerce and a decline in traditional store traffic. However, Bischoff said this can be partially explained by the growth of experiential retail, with companies like Amazon creating environments that attract and delight consumers through features like spas, cafes, art exhibitions, and pop-up shops.
Another great bellwether is the Firm Survey Report by The American Institute of Architects.
Recent data shows design contracts and inquiries off the chart, in a good way. “The unemployment rate for architectural professionals is below 2% right now, which is good for all of us; it’s a great leading indicator,” Bischoff said. “They are all working on something.”
There is an infinite number of credible sources from which to derive data. Any numbers junkie can spend months analyzing and agonizing over the what-ifs. What indicators, official or unofficial, do you count on to make your business decisions? Write me at kernt@bnpmedia.com.
