Continuation of Pessimism Not Warranted

By Natalie Dolce

LOS ANGELES—With the amount of money the government was putting into the economy, it was inevitable that things would recover. We have regained 8 million jobs added since the bottom of the recession and the continuation of the pessimism and uncertainty isn’t really grounded. That is according to Hessam Nadji, SVP and chief strategy officer of Marcus & Millichap.

Nadji joined moderator Michael Desiato, moderator and VP and group publisher of ALM’s Real Estate Media Group, and other industry leaders at the recent RealShare Los Angeles event here on Tuesday. According to Nadji, “the notion that the US economy was out of the game is always wrong. We do find a way to come back.”

Having said that, Nadji says the growth rate isn’t anything to write home about. “But this moderate level of growth is here to stay.”


Panelists on the industry leaders panel say the moderate level of growth in the economy is here to stay.


Panelist Marc Jacobs, managing director of Oaktree Capital Management, agreed, noting that the real estate market is on solid footing, at least in the near term. But there are early signs of caution out there, he warned. “It may not be real estate in general, but it might be corporate America that is loading up on cheap debt and will struggle to pay that debt back,” he said. “What will happen once the Fed starts pulling back?”

According to Eric Paulsen, CEO at, property values are still below their peaks, so there are still opportunities there. “An improving transactional market is always a better market. We willcontinue to see more and more sales with moderate improvement in the coming year.”

On the apartment side, according to Nadji, if you look at the recovery, “you are on the money about the apartment recovery being the only one for a long time.” But what’s interesting, he said, are to look at the fundamentals. “We should be seeing a slow down, but we aren’t really seeing that. The math still works for the most part but the big question mark is exit cap rates.”


We have regained 8 million jobs added since the bottom of the recession and the continuation of the pessimism and uncertainty isn’t really grounded, said Nadji (right) with Xceligent’s Doug Curry (left) and Oaktree’s Mark Jacobs.


There are some overbuilding on the high-end apartment side, warned panelist Mark Jacobs, managing director of Oaktree Capital Management.

“You will still see rent growth on the apartment side,” added Paulsen, but you are seeing more on the retail and office side, he said. Investors are chasing yields, with a lot of money chasing fewer assets. So what do they do? They go to a different market, he said. “One of the reasons you are seeing a bigger movement in secondary is the availability of information out there among other things.”

One of the companies with that information is Xceligent. Panelist Doug Curry, CEO of the company, said that his company is trying to bring a different level of transparency to the market with data collection.

The biggest laggard in this recovery has been office, according to Nadji, because of the excess space that was never put back on the market, and companies are now growing into that space. But that is the place to now invest, he said. “The demographics in job creation look strong… It is the year of the office market. The turning point is there. You will see the office market come back fast from this point forward.”    [emphasis added]   

Paulsen agreed that office is the place to go right now, but what’s important to consider, he said, is what the product will look like. “You are going to have to cater to a different demographic.”

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