Globally: Economic Challenges at Ease


Growth in real estate transaction volume over the past eighteen months has slowed despite solid and consistent growth until recently. Over the next six months, CBRE, an American commercial real estate company, expects a modest improvement in the climate due to policy uncertainty around the world, tighter financial conditions in the United States, and Real Estate pricing.

Policy making greatly shapes the freedom investors have in the global market place. Policy uncertainty in the world, indicated by the Global Economic Policy Uncertainty Index reached record highs in early 2017. The index is based upon a blend of tax code provisions set to expire in certain countries, newspaper coverage on policy creation and divergence in economic forecasts. Most recently, Brexit has been attributed to the large spike in the indicator. Brexit is another movement thought to be part of a concurrent theme of a strong anti-globalization stance world players are taking. This anti-globalization movement can be described as the populist’s distrust in existing government. One growing concern for investors is that this movement may be attributed to a loss in confidence, which is the base of capital flows. Spectators say that the effects of Brexit will be felt slowly and that President Trump has pursued a much less aggressive agenda than he advocated for on the campaign trail. In the European realm, there has been a shift to a more centrist, pro-globalization political party, and although we are long from stable policies in place, the fewer amount of significant elections should help global investors. In general, elections are often used to determine the future of a nation’s policy making and financial conditions.

After the elections earlier this year and towards the end of last year, tighter financial conditions in the United States have been researched by the Chicago Feds Adjusted National Financial Conditions Index (ANFCI) and show that conditions were tighter than average in 2015 and 2016 following a long period without difficulty. Additionally, a strengthening currency, rising bond rates, and shrewd actions by Fed all play a part. Each of these indicators are popular indicators in forecasting the United States Economy. These financial conditions will ease their way in activity due to the lag of the impact on the real economy. This will offer investors a reason for confidence for the remainder of this fiscal year. Another indicator, the Bloomberg United States and Eurozone Financial Conditions Indexes, is yielding towards a two-year high, revealing financial conditions that support investment market. Finally, CBRE’s Ahead of the Curve, merger and acquisition activity, which is an indicator for commercial real estate proved to be stronger Q1 of 2017 compared to Q1 2016.

Real Estate pricing has also been a big factor in today’s global market. Capitalization rates in the global market are at their lowest since 1990. Capitalization rates or cap rates are a financial metric used to measure comparisons in different real estate investments by dividing the net operating income (NOI) by the listed price of the property. After Q1, average global cap rates are 4.3% for office, 3.9% for retail and 5.3% for industrial and logistics real estate. Although these rates are designated to the highest grades of real estate investment, they are suggestive of how attractive real estate is to global investors currently, with very few sellers in the market. This challenge is not expected to ease with global growth expecting to pick up.

In conclusion, CBRE is hopeful for another strong year in global real estate capital flows as challenges become stabilized but 2017 is doubtful to eclipse 2016 numbers. ‘We at Integrale Advisors appreciate the forecast by CBRE and appreciate the opportunity of working with them sourcing potential investments’ –Keith Knutsson.

“How Today’s Generation is Turning Homebuying on its Head” examined by Keith Knutsson


According to the National Association of Realtors, for years, the American Dream included a stable job and a comfortable suburban home close to good schools. If all went according to plan, that classic white picket fenced home was a solid investment for years to come; median home values have risen every decade since the first housing census in 1940. This model is changing with today’s generation as outlined by Keith Knutsson of Integrale Advisors.

“Today’s first-time home buyers aren’t following in the steps of their parents and grandparents. The economic and cultural environment looks quite different. Instead of moving to the suburbs, many are remaining in cities where they had been renting. Or they are opting for homes on small lots in planned communities in walking distance of conveniences like restaurants, grocery stores and shared green spaces similar to that of a large city” states Keith Knutsson

“Technology is also altering the real estate landscape” said Keith Knutsson. Today, real estate agents work with buyers who have already studied the marketplace online and expect quick answers, properties that meet a long list of requirements and help with closing transactions. Oftentimes first time home buyers are relying solely on technology to both buy and sell their home.

Shifting economic landscape

Economic changes have majorly transformed the real estate landscape for first-time homebuyers. In 1950, the median single-family home price was $7,354, or $44,600 when adjusted for inflation. Today, according to the National Association of Realtors®, the median home price has mushroomed to $233,900 in 2016, or five times more than what one paid in 1950.

Keith Knutsson stated “Homes were also more affordable for mid-century buyers, not only because they were cheaper in today’s dollars, but also because they were more reasonably priced relative to income. The median home price in 1950 was about two times median household income. Today, it’s four times.”

That’s what Anna, 30, a new home buyer experienced when she and her husband set out to buy their first home.

After renting a one-bedroom apartment in Brooklyn for seven years, the couple, planning to start a family, looked to buy in nearby South Park Slope section of Brooklyn, hoping for a three-bedroom apartment with enough space to grow.

Sticker shock quickly set in when they realized this would cost close to $2 million. While the couple had what Anna described as “healthy” savings, they still needed a loan from their parents to help make up the $800,000 down payment on the $1.8 million three-bedroom condo they bought in May 2016. That family loan took the edge off the mortgage amount and made them more appealing to sellers.

“The process was pretty long and exhausting,” Anna said. After the couple began their search in September 2015, they had two offers fall through thanks to a buyer who offered more cash down and another buyer who offered all cash. They leaned on their real estate agent to help them navigate the tricky closing process that finally got them to their more spacious home.

Demand for conveniences and the urban experience

One reason for the demand Anna experienced is a desire among many first-time homebuyers for urban living. A surge of both renters and buyers in cities across the country is constraining inventory and driving prices up, putting affordable first homes out of reach for many buyers.

What’s driving this trend? Keith Knutsson suggests “A healthy job market—the unemployment rate among those 25 and older with a bachelor’s degree or higher is 2.5 percent, significantly less than the overall rate of 4.6 percent, according to the Bureau of Labor Statistics. There is also the demand for shorter commutes to work and walkability to bars, restaurants and retail.”

“We love not having a car and being able to take the subway everywhere we need to go,” Anna said. “I was not at all interested in moving to an area where I’d have to take a commuter train to work. And South Slope is actually quiet and calm enough that it has sort of a suburban feel while still having all of the conveniences of a city neighborhood.”

That kind of urban/suburban mix is increasingly attractive to first-time homebuyers and repeat buyers alike.

“The country is becoming more urbanized, with a greater share of the population living in Census-defined metro areas,” said Lawrence Yun, chief economist at the National Association of Realtors®. “That leads to the trend of making homebuying decisions based on commuting patterns, higher land values and the likelihood of not even having a car.”

The changing face of homebuyers

“Demographic shifts are also impacting the current homebuying landscape. While married couples still make up the largest share of buyers at 66 percent, single women are entering the market in greater numbers than before, making up 17 percent of total home purchases—the highest since 2011” states Keith Knutsson.

“About one-third of my buyer clients are single women,” Harrell said. “Women are working and earning more in today’s generation and are waiting longer to marry. They do not need another income to have the means to make their first investment in a home, and they have no qualms about not waiting for marriage before they dig in roots.”

Whereas previous generations of home buyers might have given their real estate agent a short list of desired features, today’s first-time buyers have a more defined sense of what they want, and rely on their agent to help them find a home that meets their unique specifications.

US retreat from global financial system – Keith Knutsson


Borrowers now have access to the savings of the entire world if they can show lenders that they can make effective use of their money. It should also mean that lenders can search, on a global level for the opportunities that give them the best return for the risk with which they are most comfortable. The following should benefit both lenders and borrowers.

For borrowers, the cost of a capital loan should be lower than that on offer in smaller domestic markets. On the other hand, creditors’ returns should be far more attractive since they have more options for where to put their money to work. Since the global financial crises, there has been some negativity in the air. This negativity has greatly increased in recent months. Some regulators and financiers moved away from embracing globalization, further claiming that it led to the crisis. However, there is potential for a turnaround; especially if less developed nations and financial markets can improve the way they allocate capital.

Leading up to the crisis, capital inflows and outflows moved in obstructive ways. It transitioned from higher growth emerging markets to slower growth developed markets. Much of these flows went into US Treasuries to strengthen reserves in the aftermath of the 1997-1998 crises.  Those capital flows to the US and to the dollar, the world’s reserve currency, meant that Americans could pay for larger properties with money that was cheaper than it once was. European banks continued to borrow those dollars in wholesale markets rather than relying on deposits to fund their own activities. This resulted in what international bankers are calling “the transatlantic banking glut”.

Globalization, all in all, meant poor capital allocation of debt and a huge accumulation of unsustainable debt. This resulted in a rolling crises as investors sought high returns in short-term securities, whether in emerging markets, the US, or Europe.

Central banks in developed nations responded to the crises by implementing easy monetary policies. Thus, triggering an artificial rise of asset prices, which led to an increase in capital outflows into emerging markets as yields were driven down at home. “The Fed should remember that when it makes monetary policy it should take into consideration the impact on the rest of the world,” stated Gao Xiqing, the former head of the Chinese sovereign wealth fund. A decline in globalization would result in a retreat from the dollar and from the US-centralized global financial system. The U.S. had advocated for policies regarding this that would in effect extend US control beyond its shores, especially as the new administration is attempting to limit terror financing and money laundering. The rules have become so burdensome for foreign banks that some have closed their US branches.

There is no better depiction of US policies putting a strain on the global economy than in recent Federal Reserve Board actions regarding “swap lines.” A swap line is another term for a temporary reciprocal currency arrangement between central banks. The central banks of two nations agree to keep a supply of each country’s currency available to trade to the other central bank at the going exchange rate. The Fed maintains lines with Japan, the Eurozone, the UK, Switzerland and Canada.

As the US steps back, we see an emergence of other developed nations are filling the role. China, the economic powerhouse, is taking a greater role on the global financial stage. The rest of the world is trying to circumvent the uncertainty of central bankers, US regulators, and politicians.

Although large companies will always have access to global markets, cross-border investment has become increasingly more difficult due to protectionist measures. As a result, this is expected to produce a smaller demand for capital intensive goods and services. If companies are forced to look domestically for funding, that could be a good thing if governments are more effective in making sure capital is properly allocated. However, there is currently little evidence this will be the case.

This and other articles originally published on Keith Knutsson’s Blog

The Gig Economy is Changing the Corporate Landscape – Keith Knutsson


According to a survey, 85% of people are dissatisfied with their jobs (Cushman and Wakefield, 2017). “Flexibility is the driving force today for choosing a dream workplace” said Keith Knutsson of Integrale Advisors. Free communication channels and globalized networks, have allowed for the fast growing “Gig Economy,” which consists of 20-30% of the working population worldwide.

The term “Gig workers” refers to consultants, contractors, or temp workers. The following professions are changing the corporate landscape. Nowadays, companies can easily hire non-permanent employees (temps) on an as needed basis. These “independent workers” are enjoying a balance of freedom, flexibility, and work life. However, there are some consequences. Gig workers lack healthcare benefits and job security.  Nevertheless, it is predicted that 40% of the global workforce will be independent contractors and ‘solopreneurs’ by 2020.

The impact of the gig economy will have a direct effect on workplace of the future. Globalization of work, global trade, and technology shifts have contributed to the rising gig economy.

Reasons for workers to choose independent work:

  • Ability to turn down projects if uninterested.
  • Freedom to choose type of work.
  • Flexibility; when and where to work.
  • Versatility; working on multiple projects for different clients.

Reasons for companies to hire independent workers:

  • Lower office space costs.
  • Reduced cost of healthcare and benefits.
  • Ability to bring in skilled workers/expertise when needed.
  • Scalability; ability to hire workers when necessary.

Analyzing the effect on the corporate environment:

Firms are redesigning their offices to provide fewer private offices and cubicles, and more open and collaborative space. There are two goals: 1) provide workplaces that facilitate collaboration and 2) decrease the firm’s overall rent expenses by providing less physical space per worker.

Companies have leased several million square feet of space in the past few years and that trend is expected to continue with the growth of the “gig” economy. This economy also impacts traditional corporate culture and the engagement of employees. When all employees are engaged, they are more likely to commit themselves to company goals and achieve higher levels of productions.

According to an analysis by Cushman and Wakefield, “65% of today’s school students will be doing jobs that don’t exist yet.” In addition to millennials rejecting traditional employment and choosing to work independently, artificial intelligence and robotics will also be more prevalent in the future. Businesses that will be successful in the future will be those who encourage adapt well to change.

Keith Knutsson of Integrale Advisors Announces Business Scholarship


The application period opened today for the Integrale Advisors Scholarship Program. This is an undergraduate scholarship for all students in the nation, providing up to $1,000 per year for four years of study for high-achieving students with financial need.

The application period will remain open until September 10, 2017.

Each scholarship is intended to cover a share of the student’s educational expenses – including tuition, living expenses, books and required fees.

“People from Integrale commit their time and ideas to encourage young people through our Young Mentor Program (YMP). Now for the first time, Integrale will assist young people by offering a scholarship to help with their academic pursuits,” said Keith Knutsson Managing Director of Integrale Advisors.

Scholars are selected based on exceptional academic ability and achievement, financial need, persistence, service to others and leadership. Students must be residing in the U.S. at the time they submit their applications. Scholarships are awarded without respect to religion, sexual orientation, gender identity, citizenship status, geographic region, race or ethnicity.

Applicants must earn a cumulative unweighted GPA of 3.2 or above and must be currently enrolled in an undergraduate or graduate program at an accredited university or other institution of higher learning in the United States. Candidates should apply through instructions on the Company’s website