Hitting the ground running

Nick Jopling, Head of Residential at CB Richard Ellis:

The first day of the NMHC conference was actually the day before formal proceedings commenced, when most delegates arrive. Needless to say there is no rest for the wicked and our first meeting was at 7.30am. By 8.15am, I was on my feet explaining the aim of our visit to the 20 members of the CB Richard Ellis Multi Family Housing Executive team based in the US. The rest of the day was spent moving from one introduction or meeting to another.

There are over 1,500 people attending the conference with the delegation list capped at around 900, which ensures companies only send their most senior staff. About 500 delegates attend the CB Richard Ellis cocktails and dinner, and this seems to be the starting gun for the whole event. My colleagues in London will be quietly pleased to hear that it is unusually cold in Florida this winter, the local news headline featured frozen fish ponds that have killed thousands of tropical fish; the dinner was therefore moved inside.

In fact the warmest place I found yesterday was the lift of a 27-storey building that I got stuck in with eight others. It took over 35 minutes to release us and by the end it was pretty warm. It was interesting to note different people’s reactions to this event; everyone remained calm, but there were a few who were clearly living through a nightmare and I suspect will be using the stairs for the rest of the week.

The conference is a focused event, which allows for easy conversation with anyone you meet or are introduced to. The US rental market is made up of approximately 35m households of which around 15m are estimated to be apartments with the rest being single family homes. Of the 15m apartments, it is thought that about one third are institutional grade i.e. in blocks of more than 50 units (in fact the average is about 170) and in single ownership. It is the owners and operators of this stock that are in Miami this week.

At the peak of the market in 2007, nearly $100bn of this type of property was traded or refinanced. The guys I met from CBRE oversaw between 20-25% of that activity. Last year, it is thought total activity dropped to around $14bn with CBRE still supporting the same share. It is this experience that my colleague and Head of UK Development Chris Lacey and I have been able to draw on to get a forensic understanding of how the sector works and what we believe is transportable across five time zones east, i.e. the UK.

The topic that seems to be on many lips on the eve of the conference is where are interest rates going? The yield on the ten-year note has moved up over 50 basis points in the last two months to 3.79%. Fifty economists collectively reported in the Wall Street Journal this month that they thought rates would be at 4.25% by December 2010. When you add 200 basis points to any loan rate that Fannie and Freddie offer it is understandable why the subject is so topical.

Fannie Mae and Freddie Mac are almost the only lenders in town, and of course they are in town all week. They lend only on investment product, not on development, so even if we could transport them to London it wouldn't be any good as we have no suitable investment product that could be called multi-family housing - we have to build it first.

The debates over the next few days will be interesting and with Newt Gingrich (Republican) and Howard Dean (Democrat) closing the conference on Friday I am looking forward to learning so much more.