4/6/21 – Detroit Mastermind Group

Detroit April 2021- Key Takeaways

• Steve Sallen of Maddin Hauser reported that he is sending out a survey to his staff to find out their feelings about a return-to-work in the office. Questions involve seeing how many have been vaccinated, how many feel that it would be safe, and what other recommended protocols do they want to see established. As for business, he reports that activity for his firm remains brisk.
• David Hart, also of Maddin Hauser, is very busy with litigation and is bracing for a deluge of work when the courts actually reopen. David indicates that there are construction lien suits as well as neighbors arguing about boundaries. They are all dragging out longer than usual because there are no trial dates with the courts closed. The big backlog will be a problem once the courts open.
• Martin Lavelle reports that the economy is picking up steam. Forecasts are higher for growth and vehicle sales were red hot in March. More travel, restaurants and hotels are open now. The stimulus checks have infused the economy with cash. Martin sees inflation moving higher as the year goes on. He says that we haven’t seen 3% in a long time. Savings rate is at 13%. All service industries will be jacking up prices as the increase in demand for services swell.
• Tom Barrett indicates that the deadline for applying for round 2 of the PPP loan has been extended to the end of May. A lot of properties still don’t have cash flow, so many bad loans on bars, restaurants and hotels. Banks are fatigued as the economic situation continues to deteriorate. No events = no cash flow.
• Michael Ziecik reports that business volumes overall are down. Markets are soft. Users will downsize. Office is very soft. Cost of construction materials is very high. There are plenty of buyers, but no prospects. While the family home market is red hot, 1031 rules could change for the commercial market. Some businesses are buying up family homes and leasing them for income.
• Brad Rosenberg indicates retail is strong. There are several out-of-town companies shopping in Michigan, including a golf club manufacturer. Shake Shack is actively investing in new locations. Aldi is also very busy with new stores. TJ Maxx is coming in with a new shop called “Home Sense”. Restoration Hardware is looking to open a new location in downtown Birmingham.
• David Dismondy indicates that life companies are interested in multi-family sites. There is a lot of debt out there now. He has seen several smaller retail deals.
• Matt Fenster is busy with leases. Medical leasing is robust, and medical has not been affected like the office market. He has also done a few industrial deals, but he says you have to act very fast with industrial or you stand to lose it.
• Matteo Passalacqua indicates that there are many companies developing return-to-work plans for reopening their offices. Google is mandating its employees to return to the office in September this year. The Clean Future Act will impact new builds with energy standards.
• Todd Shelly of PEA is very busy too. Proposals and backlog are strong. The mild winter has been good for them. They have 40 to 50 percent of the office staff reporting to work every day. COVID and the field staff have been a problem. They are short on field staff almost daily.
• John Mundell indicates that Marcus Millichap is at a sweet spot. They have a lot of capital and limited inventory. There are more aggressive cap rates. Industrial and warehouse is best. He is assuming that there will be a good rebound in the market.