Ep. 45 What Does 2021 Have In Store For Commercial Real Estate? With Dr. Glenn Mueller

Foreign.

Welcome to the next Low Income show where it's our goal to take your income, your investments and your life to the next level. Chris I'm your host, Chris Larsen. You can get a free copy of my book@nextlevelincome.com just click on the book link. On today's show we have Glenn Miller, Ph.D. Dr. Miller has 44 years of real estate industry experience, including 37 years of research. He's internationally known for his market cycle research and that's why he's on the show today. After I heard him at a conference in Keystone Resort earlier this year, prior to Covid even starting, I knew we had to share what Dr. Miller has to say with our audience. Dr. Miller is a professor at University of Denver's F.L. byrne School of Real Estate and Construction Management as well as the Real Estate Investment Strategist at Black Creek Group. He's an Advisory board member at Arden Group, a former Chairman of the board for European Investors REIT fund and a 20 year visiting professor at Harvard. I will tell you you're not going to want to miss this episode because in my opinion, Dr. Miller shares how you can take data and use it to create a crystal ball to determine what are the best areas of real estate to invest in, where we are in the market cycle, and how you can get the best returns for yourself and your portfolio. He's also going to share where we are in today's market cycle. He's going to talk about industrial, he's going to talk about apartment buildings, whether we have too many apartment buildings or not enough. And then the question on a lot of people's minds, are office spaces going away? Should we have more office space? Should we have less office space? What should we do with the office space that we have right now, if anything at all? If you're listening on our podcast today, I urge you to check out our YouTube channel and that's going to allow you to see the presentation with Dr. Miller's slides. You can also download them if you look in the show notes from the University of Denver website. After this short message, come back and join us for this data packed special episode as Dr. Miller joins us going into 2021 to tell us where we are in today's market cycles.

Today's show is sponsored by MFIN Summit. That's the Multifamily Investor Nation Summit coming up on January 21st through the 23rd. Do you want to learn how to buy an apartment building? If owning and managing or being an investor is better for you, perhaps you just Want to learn more about the asset class in general? The MFIN Summit is a three day information packed event for multifamily investors with over 1000 attendees and over 5050 speakers including yours truly. You'll hear from experts about finding deals, raising capital, underwriting strategies, selecting markets and so much more. You can hear me as well as dozens of other speakers during the event. Go to mfinsummit.com to grab your ticket. That's mfinsummit.com to grab your ticket and use promo code nextlevel all caps, no spaces. Next level to get $100 off. Whether you are new to multifamily investing or a seasoned investor, you do not want to miss this event. Join me at the Multifamily Investor Nation summit in January. Dr. Miller, welcome to the show.

Thank you. Glad to be here.

Yeah. So we first met out at the Best Ever conference earlier this year before the whole pandemic started. And I will tell you over the course of the two days I was most impressed with your presentation. I love market cycles. I talk about that in my book. Talk about just my experience watching my parents lose their jobs and I just would love to get your take on what you think of 2020 as a whole, how the pandemic has affected the current cycles before we talk about what the future holds for us.

Sure, glad to do that. And I'm actually up here in the mountains of Colorado right near Keystone and the view that you see behind me is my favorite sunset from my office window. I am going to actually stop that camera so you can see my slides clearly so there's no loss of fidelity and all that kind of stuff. So hold on a second. And there we go.

Outstanding.

As you know, I'm a professor at the University of Denver and have been doing this for a long time. I started looking at market way back in 1990 when I was with Prudential real estate investors and the things that drive real estate cycle, really the economy and supply. And so I want to show that as we go here. And so population growth, obviously people use space and that drives demand for real estate, GDP growth. Determine how much space they're going to use. And you're looking at a pre Covid forecast here where you can see that it used to run about 2% and is expected and it was asked to continue on that same glide path for many years going forward and that was a great trajectory.

But.

But we've just been through the longest economic upcycle that we had and Covid shut that down. Although what we've had is you may have heard the term K recovery. A V recovery is a down and a bounce right back up. A U shaped recovery is bounced to the bottom, sit there for a while before recovering. And a K is a combination. We have Covid essential businesses that get to stay open, keep working and non essential which have been closed down, basically retail, restaurants, those types of things. And so we actually did have a V shaped recovery with GDP dropping 2% in the second quarter and then bouncing back 34% third quarter. But remember, if you go down 32, you got to come up 37 to get back to this place. And then we have all these people and businesses that haven't come back yet. And that's bottom flat line. So take a V on top of a flat line and you basically have a case sitting outside. But really the most important thing is employment growth and employment growth. We've lost millions of jobs that may never come back as smaller restaurants close and those people have to get redeployed into the workforce someplace else. So the COVID drop there, that is probably going to be more of a U shaped recovery. If we're lucky, the vaccines do take over and help us get back to where we're going. On the cost side, we always look at inflation and of course inflation bounced around a lot since the recession, bottomed out with a negative number back in 2010 and has averaged about 2%. Expect that to be probably a little more than that. And again I've got Covid haves and have nots in there. If you look at the construction industry, lumber prices were up 60% for a while. Now they've backed off to about 20. Building supplies and labor have been very hard to come by. So demand there is extremely strong. But obviously restaurant and retail workers, a lot of them lost their jobs and many may never come back. In income producing real estate, I use that term versus commercial because I include apartments in there. So you've got the five major property types off retail, multifamily and hotel and those are doing well. The ten year treasury is how we benchmark mortgage in the commercial real estate world. You can't get a 30 year mortgage on an office building in 10 year treasuries is again a graph through 2019 with an expectation of interest rates increasing. But as you should all know, the current rate on the 10 year treasury is around 810 of 1%. That's sub 1%. And that's probably going to continue for a while going forward because people are trying to put their money in really safe places. That means that we have the lowest interest rates on home mortgages and commercial properties that we have ever seen since we started collecting that data. So that's I guess one bright spot, what we're seeing going on there. Yeah.

So let's stop there for a second. Dr. Miller. So with respect to interest rates, we've seen historically low interest rates, typically, you mentioned apartments, which our audience is very accustomed to. The cap rates a lot of times are trading within a band of that 10 year. Is that accurate? Yes.

And actually we'll get to that a little bit later on here in the presentation. We always look at the spread over the 10 year treasury on cap rates and it is at a reasonable rate. You're talking if you're the best apartments in the country, class A in the big metro areas, they're probably in the 3.5% cap rate range. In secondary markets are probably in the 4% to 5% range and third tier markets, and a class B C might be in the 6% range today. Is that what you're finding?

Absolutely. Yep. You're spot on there.

Right. And if everybody's looking for yield, looking for income, that's a pretty good income. The question is, or the new question is, and the new data that's being collected is are the rents that you are, you're actually collecting them. So a new statistic that's kind of arisen this year is what percentage of rents are you collecting? And very fortunately in the apartment world that number has been high. It's been in the low to mid-90s percent range because people obviously, they're now stuck at home in their apartment. And the government relief money and unemployment money allows them to pay their rent so they can stay in their apartment. If and when that ends, if we don't get another stimulus package going here, we could see that in the restaurant, in the retail industry, that number dropped when Covid when all these things got shut down to like 30%. It's risen back to about 50, 55% now, but it's pretty low. So this has become the new statistic to watch. As I say here, we have in the US Real estate cycle, I've got a physical cycle in a financial cycle, but we're looking at occupancies, rents and property types as the three key things to look at. So if you will, demand and supply drive occupancies, occupancies drive rent growth. And occupancies plus rent give you the income you're going to get off your property. That's very local in nature. And we'll talk about that here in just a moment. So my cycle graph shows you that we go through historically cycles in real estate have been around 17 years. A recovery expansion of hypersupply session phase. And it's nothing more than a vacancy graph turned upside down at the bottom points 1, 2 and 3. Down here, negative rent growth finishing out the recovery at 4, 5 and 6 rent growth but below the rate of inflation. Above 0.6, which is the long term average, rents rise rapidly towards 0.8, which is green, which is the go signal for cost feasible rents. That is the cost $400 a square building, office building. And investors are looking for a 10% rate of return. 10% of 400 is 40 bucks a square foot. That'd be the rent in the marketplace that cost just a 5 building. We can't turn the widget machine on and produce that overnight. So it takes a while for supply to catch up with demand when they're finally both grown at the same rate. You probably remember back to your Econ 101 class that that's demand and supply equilibrium in the marketplace. We would love it to sit there for a long time. It typically doesn't. Either supply starts to rise above demand as we build a little too much or demand drops off because of a recession like we're going through now. Then occupancy starts to fall off, rent growth slows down. We go back through the long term average and get low and negative rent growth. So the study that I did many years ago shows negative rates at the bottom at the long term average. This study from 68 to 97 4.6% rent growth was about the rate of inflation in the expansion phase. In the green box here you see very strong rent growth with the highest rent growth at 0.10. We peak out at 0.11. Rent growth slows back to inflation at 14 low and negative to the bottom. So what I do is I look at all the major property types and where they are in in their cycle. But the more important thing is knowing where your market is. While the national average for office may be at 0.7 here on the graph, what you see is cities are spread all over the country, all over the map here. And the reason for that is every city has a different economic driver or what we call economic based industry. I'll make a quick example here of two cities in Texas. You got Houston, the only market in recession. Why? Well, Houston's main economic driver is the oil industry. And with low gas prices that we've had for many years. They're not growing, they're not adding people, they're not exploring for more oil, et cetera. So as they lay people off, there's less demand for office space. Contrast that with Austin, Texas. And Austin is one of the tech markets, one of the high techs. And so a lot of companies moving there because they can get employees, et cetera. But Austin's over the top in the hypersupply phase, not because demand is slowing down, but because they've oversupplied it because of three or four years of really strong tech growth. And demand for office rents rose and developers are putting up new spec office space and they're putting up a little too much. So there's a difference in kind of what's happening.

Just to stop you there, Glenn, I mean this is my favorite graph that you showed when I saw this presentation here, nine or so months and you mentioned this is about every 17 to 18 years. So I guess touch on that. Why are we looking at that 17 to 18 year point typically and how far back in history has this gone?

Right.

So the data that I have goes back to the mid-1970s and we can see that cycle going along. As a matter of fact, Nareth, I've got an excellent slide that I've actually got in here showing the 17 year cycles and how they go along. So that was the reason for the 17 points that you see on this graph today. Some are a little long, some are a little shorter, but that's the average. So if it was a normal cycle, you'd see the cities marching through these one at a time. What we'd love to see is cities just hanging out at 11 peak occupancy equilibrium all the time. We put up just what we need and life is good and rents grow at a rate that's higher than inflation. That would be awesome.

Yeah. So one of my favorite books is the Secret Life of Real Estate and Banking. And that book, I read that several years ago now and they talk about data going all the way back into the 1850s and they talk about about an 18 year cycle which I mean you look at adding that extra 120 or so years, it seems to just continually line up generation after generation after generation.

Right? Yeah. Again, it's a demand life cycle that we work with here. So every property type is different though too. So here's industrial. Demand for industrial is obviously coming from online sales. And actually manufacturing has picked back up in the United States as well. And so you see here A lot of markets at that peak. Equilibrium number 11, a number of markets now in the hyper supply where again, peak, because there's been so much demand, we're putting up a little bit too much space. The other thing is, if we take industrial and look at it closely, bulk warehouse going crazy. Amazon leased 25% of all warehouse space in the United States last year. They just hit 1.2 million employees. They're hiring like 1,000 people a week. It's been unbelievable. So in some markets, we're putting up a little bit too much space. And in other cases, when you look at the what we call R and D flex space, might be a guy who's running a little auto repair shop. He's got a little office up front that you walk into, but a big garage door in the back to pull the cars in. You see a lot of small businesses that sell specialty items, that distribute them through that kind of a system, that small enough sum. And one great example of that is think about airports. The Denver Airport employed 40,000 people. And when everything's shut down, all the restaurants are closed, all the retail's closed. The warehouses that were daily supplying goods to that airport all of a sudden aren't needed at the moment. So we're seeing an occupancy decline in a specific Covid have not sector that's going on. If we go on to apartments, demand is great. The millennial generation is coming of age, getting their first job renting an apartment and things looking good. A lot of markets at the peak, but a lot of markets over the top. Because again, it's the one property type that's easy to build and oversupply. But one new thing that's been happening is since COVID kicked in, and this goes with a lot of my grad students, hey, they were living downtown, paying premium rent, having a teeny little 400 square foot apartment, but in a building that had a commercial kitchen, big gym, swimming pool, all kinds of game rooms, bowling alley. I mean, every amenity you can think of. COVID started, it's all shut down. And they're stuck in 400 square feet. They used to go out to dinner every night, now they can't. And so many of them, when their leases came up, they moved out to the suburb three times the space for the same rent or rented a house. So single family home rentals have just gone off the charts. So we've seen a move from downtown towns to the suburbs. The question is, when Covid's over, do they move back downtown? We don't know how that'll work out. So it's.

Yeah, you may be bringing this up here shortly, Dr. Miller, but this is one thing we've seen. We focused on garden style suburban secondary markets for the past seven years here and they've been outperforming versus the urban. The other difference we've seen are collections. We've seen the higher quality of ag collections almost unchanged since spring. Whereas some of our like affordable housing communities, they are collecting around the lower end of what you're saying, kind of like the low to mid-90s. We're seeing around 90% there, right? Yeah.

It's a very difficult time for the people that are living week to week, paycheck to paycheck. And the question is, how do we bring those people typically don't have good educations or skill sets. Restaurant workers, retail workers, et cetera. How do we get them back into productive activity? That's the real challenge that Covid has thrown out to us. That's hard to go by. Again, the haves versus the COVID have nots is interesting. I'm going to jump up here. You can see on this chart, supply growth used to be up in the 3%, 4% range. Bottomed in the early 90s around a half a percent. Popped back up by 1000, a little over 2% now in most of the property types in 2010 we're running around a half a percent and come back up except for apartments because again, so easy to build. And obviously you can fill a brand new apartment simply by taking away from older apartments too. Just by dropping, you may not make as much money. But we have this again, this demand growth from millennials that continues. Some of them did go home for a month or two because of COVID but they pretty quickly decided to move out and move back. So here's the data going back to 1980 basically. Peak in office back in 80. Bottom in the early 90s. Peak in 2000, bottom in 2003 when the tech bubble burst. Another peak in 2006. 07 bottom during the great recession 9, 010 but really nice moderate level here. That was 2018 and 2019 and we expected that to kind of continue right now. Recent surveys say that 85% of people say they'd rather be back in an office than working at home.

I can relate to that.

You have to distance in the office. We were cramming them down to be three feet apart if we have to do six feet like the office. So with Black Creek that I work in, people were sitting three Feet apart now, one team goes in one week, one team goes in the next week so that they're sitting six feet apart. We did stop our lease was coming up here at the end of the year. We're going to move into brand new space and put that on hold. Did a two year extension on our existing lease till we figure out what's happening. Big companies are now talking to architects about how do we design the new post Covid office. What does it look like, how does it work. But people are social animals. I'd rather be speaking in front of the audience with you here like we did at the best ever in Keystone, than doing this online because it's lonely. Right. So everybody can talk about what benefits they gotten out of being at home, but then what are the losses that we've had from that standpoint?

So my forecast, yeah, and that's been like a huge question with the office group we work with is our office is going away and I can't imagine them going away entirely. So I'm super excited to see what you got here for us.

The answer is no, they're not. But I expect we'll see somewhat of a decline in demand over the next couple years. And so you see all of the office markets in the hypersupply or the recession phase forecast out here in 2021. If we look at industrial again highest occupancy level since early 80 for industrial, expect that to slow down a little bit, the office occupancies to drop off a little bit as we oversupply a little bit. But notice that if you rent growth over time, rent growth and this is both pluses and minuses added together, rents are up 40% since we started having this data in 1995. And you can see that the correlation between the occupancy level and the rent growth is 79%. So if you tell me what's going on with occupancies, I can tell you what's going to happen to rent growth again. A lot of markets in the hypersupply phase mainly because of overbuilding, not because of lack of demand. The demand there is strong. If you can get an industrial property, you're most likely going to do pretty well. Apartments we had a peak back in 2014. Overbuilt a bunch, slowed that down, another peak in 2019. And this is the pre Covid forecast, if you will, that again supply coming on. I think we're seeing many of those buildings taking a pause because most of them were downtown. So right now actually seeing that shift to suburban apartments doing better occupancy level wise than downtown and suburban rent growth able to pick up because you had this in downtown, paying a lot more rent, saying wow, this is a really decent deal. So you're able to push rent slightly in the suburbs where you're offering more space. So a very interesting time there. And again, once we kind of settle in after the end of the year, rework some of these. So again still most of the markets in the hyper supply phase with some markets still peaking. We're also seeing people moving from major markets and San Francisco is kind of one of the biggest ones. All these tech people who it was tough to get downtown. So the Google two hour commute for some of these people on the Google bus and they just worked on the bus for hours to get to work. Now they're going why do I want to live and pay this huge rent in this teeny little apartment in San Francisco when the company says go work from any place and so they're moving to nice places. So here I am in Colorado and it is going like crazy outside right now. We've been redubbed a zoom town because all the people that have up here from Denver, all of a sudden at night I look out and 50% more lights on it than I used to see at this time of year. And so people are going to other places and whether they stay or not is kind of one of the questions. Or whether they might to the urban areas once this is over will be interesting to see.

If you don't mind. Let me stop you there one more time. There's a real dichotomy. The theme I feel like for today has been the K shaped recovery. You have this dichotomy with apartments. It seems like urban has been stagnant, you've had oversupply, whereas suburban rent growths have persisted I guess. How have you seen supply this year, Dr. Miller? Because my book, I talk about how this decade we need like 4 million units to come online. And I feel like with lumber prices, with the pause in building, how do you think that pause is going to affect the supply in the next couple of years? And what does that look like?

Well, there hasn't really been a pause. It's what's getting done. A lot of the construction labor was sucked over to the single family home marketplace where people are now at home, they want things done. I just finished rehabbing a property in Minnesota on a lake near my grandkids. Good contractors were either nine months to a year out to come and do something for you or quadrupling their price. If you want it now, it's going to cost x4x as a matter of fact. So construction demand is off the charts and get things built are doing well with it. So we'll see where that kind of goes. Again, the demand is there and as long as those millennials can get a job, they're going to be using apartments because the average age of first time home buyer in the United states is still 36 years old.

So there you go. Demographics drive it. Right.

And retail, we'll just kind of pop over here quickly. Again, it's a Covid have versus a Covid have and Covid essential businesses. Lowe's, Home Depot, Walmart, grocery stores off the charts, expanding, doing all kinds of Amazon is opening their whole new grocery concepts and stuff like that. 200 stores this year, zero content. How can you scan it with your phone and walk out kind of thing. So it's crazy time again. But a lot of demand decline. We're going to have to figure it. Matter of fact, a great place to think about investment is adaptive reuse. What do I do with this empty retail space? Do I turn it into apartments? Do I turn it into office space? Do I turn it into close in warehouse? Lots of concepts there. So that's the income side of real estate. How much time do we have left? Pop through some financial flow stuff here.

Absolutely, yeah. We can extend this because this is a, in my opinion, this is a nice special episode. A little thought there, Dr. Miller. So coming off that, talking about like converting retail, one of the areas you don't really talk about is senior housing. Feel like as the boomers start to get older, we're going to have a real demand for that versus the decline of the malls. And I've seen that there are now companies going out and acquiring malls and converting them to senior housing. That's easy because that's where those seniors walk around inside anyway. So you can just live them there, right? Yeah.

And that's the kind of adaptive reuse and creative adaptive reuse that's needed in the marketplace today. And that kind of stuff is good. And that's where again, keeping your pulse on trend changes and where demand is is a real key to success in what we're so good. So the financial cycle is capital flows affect prices. If everybody wants to put money into some kind of investment, its prices are going to go up. We've had a slowdown in the economy. We're hitting new highs in the stock market every day. Why because the world is just awash in so much cash, it's got to go someplace. And bond prices are unbelievably high and yields are unbelievably low. Where do I go? Well, the dividend yield on The S&P 500 is all of 1.4%. And the dividend yield in the 10 year treasury is now 0.8% and junk bonds are down close to 2%. So real estate by comparison ends up looking like a real winner. So the capital cycle here, the black line kind of follows the blue line. But little or no capital flowing in at the bottom grows really quickly as rent growth turns positive, peaks up and hyper supply and drops off. And two types of capital flowing. One is to existing properties. You buy a property from me for a higher price and that's more capital flowing into real estate. And the other one on the bottom there, capital flows to new construction, starts at that cost feasible rent level at 0.8 and we start building new buildings, they may not get finished till close to the bottom on the other side. And if we look at income producing real estate in the United States at $18 trillion compared to stocks and bonds, it's 22% of the investor of the universe. So all the big institutional investors, pension funds, endowments, wealthy families, et cetera, they are all allocating to real estate because they look at it as a good Yield Investment. Here's 10 year Treasuries. Look at this 2% back in 1953. Today we're actually at again below 1% today. And this forecast is obviously wrong. I think we're going to stay below 1% for a while. If you buy a bond and interest rates go up, you lose principal. So between 53 and 73, when it hit its long term average of 5,7%, the total return was only 1.9. And between 53 and 81, the total return was only 3.9 when the average yield is 5.7. Now when interest rates are going down, the total return is higher because your bond value goes up. It was 8.3, even though the average rate was 5.7. Looking pretty bad there. Downside risk. Real estate's only had five years of negative returns versus over 21st months. Right. And so capital flow, and this is now to commercial real estate, you've all probably seen in papers and stuff like that, the Case Shiller Home Index that talks about housing in the United States and where it's going. But we have the same thing for commercial real estate. It's called the Moody's Real CPPI put out by Bill Capital analytics and you may want to go to their website rcanalytics.com they started collecting data on every commercial transaction over $2.5 million. And you can see capital flow transactions of $20 billion in 1Q01, 160 billion 7 during the Great Recession only 15 billion in 09 and back up to over 160 billion starting as early as 2015 and continuing on today. And then the price index there as well. So if we break that down by property type, you can see here that apartments are 183% of or 83% higher than they were in their peak in 07. They came down, they bounced right back up. Retail still hasn't fully recovered. Industrial is 34% higher than it was. Downtown office 39% higher, office only 4% higher. So by property type is very different. And then obviously by market will be too. And cap rates used to be back in 2000 used to be in the 9% range. Today they're running and this is average high quality versus low. Right. So really strong cities. We've got apartments average A, B and C qualities at just under 5.5%. The other is in the 6% range in hotel and this is pre Covid at 8.59. They're way off the charts there now. But again how much extra income am I getting over the risk free rate of a 10 year treasury used to be 3.5% back in 2001 was only 150 basis points in 07 and today it's up there at 3.5% to 7%. So real estate looks attractive relative to the other incomes that I can get. And that's why we're seeing capital flowing into real estate today.

Yeah, and to me that's the money slide there. That's going to give you the best apples to apples comparison.

Right. And when we look at it, what's happened is in my now decades in this business, real estate was local, local buyer, local seller, local bank doing the financing. Back in the 70s and the 80s the institutional investors fund and endowments came in. National buyers, national sellers, national financing available. In the 90s, the publicly traded companies, REITS really took off and grew. And so now we had real estate access to the public capital markets through the REIT stock idea and on the debt side through commercial bridge backed securities. And since the year 2000 it's gone global. Oh and by the way, since I just mentioned REITs here, publicly traded REITs and for that matter non traded REITs I just finished a new textbook called Educated REIT Investing and you can get that on Amazon.com it's only, I don't.

Know, 28 something educated REIT investing. And what we'll do, Dr. Miller, is we're going to link all these websites you mentioned as well as your new book.

Thanks. And so what's happened is this shows capital flowing across the world in 2019. And what you see here is the United states investors put $11.8 billion into Germany and that was a 27% increase over the previous year. German productivity strong, good market, et cetera. And then number four, Germany going into the United States, five point billion down 1% from the previous year. So money's flowing around the world. And my best example was in 2019, the most expensive building to sell in the United States was a office building in New York City. It went for a 3.5% cap rate. That same class A building in London would have gone for a 2 cap rate and in Hong Kong or Singapore would have gone for a 1% cap rate. So an Asian investor in the US and goes, wow, that's 75% off the price I would be paying here. I'm going to get a lot more income. And so that international capital coming to the United States is helping to keep our prices up. The international people are pushing the US pension funds and endowments into second tier markets like Denver. And when they move in, then the family offices and the smaller investors like you or me, we move down to the third tier markets to gain that extra yield that we're looking for. So I'm actually very bullish on the fact that real estate price should hold up and do well. Demand for it by investors is strong and capital is flowing in. And some of all this real estate cycles can be long or short. We're in a down cycle right now that looks like it may have bottomed at the end of the second quarter o2 as we started to bounce back up. But again we got a V and then we got a flat K. And so you got to be really careful about the COVID haves and the COVID have nots. As far as the tenants and the buildings that you're in, you've got to really watch for that. Supply is low, how long to recover. A lot of people are saying employment won't be fully recovered until 2024. So that's a slow recovery for us, slower than we've had in past times. And debt financing is harder to get a hold of today too, which means cash is king. The more capital you've got, the better opportunity you're going to have to be able to buy stuff from that standpoint and again, keep residential homeownership separated from commercial real estate. Residential home prices have also just gone berserk because of the low interest rates, right?

Absolutely. Yeah. And in my book I talk about the differences between that income producing and most of our audience is accustomed to that. But it is amazing. You were talking about your rehab. My wife's an architect, a residential architect and she's doubled her prices. She's booked out two, three times as long as she's ever been. It's really incredible. So regarding the presidential election and I don't know if we have an answer yet, even though this is going to be airing here in a few weeks, who is going to be our next president? Definitively, I know there's still some question marks out there, but let's say Joe Biden is our next president. Any ideas on how his policies may affect the commercial real estate market? Dr. Miller?

Well, I think it's also down to the two Georgia elections. If we have split politics here, that means that a lot of the higher tax policies don't get pushed through right now. There are a lot of people that need it badly though I think that have come in case A lot of people talk to me about, well, aren't you worried about just debt being so much more for the US government. They got $1.6 trillion in cash in the treasury right now. And my answer is no. Back in 1980 when interest rates were 15% it took 18% of the federal budget to just pay interest on the bonds they had outstanding. Today it's only 8% of the federal budget. So in other words, you can afford to borrow more when interest rates are and one of the things that happens is one of the reasons house prices go up are they okay, you make pick your number x amount a year and you take 30% of that and that qualify to own a home. Right. So if interest rates go down, you can qualify for a bigger mortgage. So the owner of that home is just going to raise their price for you to be buying the same amount of square footage based off your income but at a larger price because of the lower interest. So if you can buy an apartment building, used to buy apartment building at 5 cap and get a 3% mortgage. Hey, you can buy at a 4 cap and get a 2% mortgage. The spread's the same. Spreads the same that's spread investing. What is the debt going to cost me versus the income that I'm going to receive. You gotta always run that calculation for yourselves.

Dr. Miller, this has been fast paced. You've been data rich and all this stuff. I can't thank you enough for sharing what you shared with our group earlier this year with our audience going into 2021 for your new book, One More Time, where's the best place for our audience to get that?

Okay. It's called Educated REIT Investing. And just go to Amazon.com, it's available both electronically and in print.

Outstanding. And then your market cycle report is free on your University of Denver website. Right.

And that is DU for DenverUniversity. Edu Burns B U R N S dash or A minus sign school. So DU Edu Burns School.

Outstanding. Awesome. And we will link all of this in our report. And then if people want to subscribe to your forecast report that they can get annually and like I like to say, get a look into your crystal ball and determine what are the best opportunities in the future. What's the best way to do that?

Okay. Best thing to do is actually just send me an email. My email address is on the Cycle Reports. It's Glenglanan Muelleru. Edu on the subscription.

Awesome. Well, enjoy that sunset. Glenn, I really appreciate you joining us today. I hope you have a wonderful holiday with your family and hope to share knowledge again with our audience again soon. If you've enjoyed today, please like subscribe and share the content here. And thank you so much for taking the time today.

All right. Merry Christmas.