10 Must Reads for the CRE Industry Today (January 18, 2017) Photo by Mike Coppola/Getty Images

10 Must Reads for the CRE Industry Today (January 18, 2017)

 

  1. Can Apartment REITs Turn It Around in 2017? “Supply is the name of the game with the apartment sector, which uncharacteristically underperformed through 2016. The sector, which has been a perennial leader in recent years, posted a flat 2.86 percent total return for the year, a stark contrast with its more than 50 percent rise during 2014 and 2015. Among the four major REIT sectors (along with retail, office, and health care), it is one of the most interest sensitive, and it appears the impact of rising rates canceled out any benefits that should have accrued from rising household income and expectations for inflation. Though 2016 was disappointing, the outlook for the apartment sector remains positive: executives maintain that flattening supply growth will bolster returns. '[M]ultifamily will continue to be a favored asset class for commercial real estate investors,' says Kim Betancourt, director of economics and market research at Fannie Mae. 'A combination of . . . a healthy spread between cap rates and U.S. Treasury rates, continued job growth, and demand for multifamily rentals from millennials, coupled with low homeownership rates, present a positive scenario for multifamily fundamentals over the next 12 months.' The apartment sector also shows resilience to the movements of the broader equity markets; in some cases countercyclical results can even be seen: Falling or flat income encourages potential homebuyers to hold off until income growth returns.” (Urban Land Magazine)
  2. Hotel prices in D.C. up 927% ahead of Trump’s inauguration — and protests “If you’re planning on attending the presidential inauguration in Washington, D.C., on Jan. 20, finding a place to spend the night could cause some damage to your bank account — even if you aren’t staying at the Trump International Hotel. Prices of hotel rooms in Washington, D.C., are 927% higher than usual for the week of the ceremony, according travel website Trivago, at an average of $2,071 per night for a standard double room. Barring major events like Inauguration Day, the usual rate for a room of that type in the city tends to hover around $200 in January, at $215 in 2013, $204 in 2014, $186 in 2015, and $204 in 2016, according to Trivago. Surrounding inauguration week, there is always an “uptick in hotel demand, regardless of the party that wins,” said Kristin Lamoureux, associate dean of the Jonathan M. Tisch Center for Hospitality and Tourism at New York University.” (MarketWatch)
  3. Economy Watch: Holiday Spending Exceeds NRF Forecast “U.S. retail sales during November and December increased 4 percent over 2015 to $658.3 billion, according to the National Retail Federation, citing a strengthening economy as encouragement for consumers to spend more freely than expected. The number includes $122.9 billion in non-store (Internet) sales, which were up 12.6 percent from last year. The numbers exceeded NRF’s forecast of $655.8 billion, which would have been an increase of 3.6 percent. NRF had also forecast that online sales would grow between 7 percent and 10 percent, to as much as $117 billion. The organization’s numbers exclude automobiles, gasoline stations and restaurant sales. Sales were a mixed bag according to retail type. Sales at clothing and accessories stores increased 2.5 percent year-over-year, while sales at general merchandise stores decreased 1.5 percent, the NRF reported. Electronics and appliances stores’ sales decreased 2.3 percent year-over-year.” (Commercial Property Executive)
  4. The restaurant recession turned even more damaging in December “U.S. restaurants ended 2016 on a grim note, chalking up their weakest same-store sales in more than five years, according to industry tracker TDn2K. Same-store sales, a key retail metric that measures sales at outlets open at least a year to eliminate the effect of restaurant closures and new openings, fell 2.4% in December, the research company found in its latest Restaurant Industry Snapshot. Overall sales fell 4.3% to mark their worst performance in more than three years. To put the second-half sales downturn into perspective, said Victor Fernandez, executive director of insights and knowledge at TDn2K, the only two quarters with comparable-store-sales declines of greater than 1% during the last five years were the 1.1% decline in the third quarter and the decline of 2.4% in the fourth quarter of 2016.” (MarkeWatch)
  5. Among Obama's Pardons, Hotel And Real Estate Magnate Ian Schrager “Ian Schrager is well-known as the co-founder of New York's famed Studio 54 nightclub and for creating some of the hippest boutique hotels and condominiums on the planet. Less known, however, is Schrager’s 1980 conviction on tax fraud. At least until today. That’s because Schrager's name appeared on a list of people granted full pardons by President Obama. Schrager’s name is easy to miss. The list of more than 200 pardons and commutations includes some high profile names. Among them, Chelsea Manning, the Army private accused of leaking classified military secrets to Wikileaks. Manning was convicted in 2013 to a 35-year sentence in a military court. He will now be freed from a military prison in Leavenworth, Kan. on May 17. Manning was convicted under the name of Bradley Manning and now identifies herself as a woman.” (Forbes)
  6. The Real Estate Roundtable Poses Tax Reform Questions to Trump “The real estate industry’s wish list for President-elect Donald Trump arrived two days after Election Day. Packets like the 41-page memo from The Real Estate Roundtable have no doubt been filling in-boxes at the transition team’s headquarters. Yet the policy guide from Trump’s real estate brethren presents him with a special quandary. Trump and fellow Republicans in Congress have placed federal tax reform at the center of their plans. In doing so, however, they’ve called for changes to provisions of the tax code seen as essential to business by members of the powerful national organization of real estate owners, financial firms and trade groups. Winning industry support for any bill may prove tricky. As much as the real estate industry wants a ‘simpler, more rational tax code,’ a comprehensive bill carries ‘potential for tremendous economic dislocation,’ the Roundtable memo warned. Some reforms pose the risk of lowering property values, which would “produce a cascade of negative economic impacts.” (Commercial Observer)
  7. This Is Donald Trump’s Net Worth “Republican president-elect Donald Trump emerged as an unlikely victor in a grueling presidential contest against Democratic nominee Hillary Clinton. Over the months, the billionaire businessman, television star and politician beat out contenders in the polls, thrilling throngs of adoring fans. On June 14, Trump celebrated his 70th birthday and, just a few months later, was elected president. Here’s a look at Trump’s businesses, presidential campaign, lavish lifestyle, family and net worth. Forbes puts Trump’s net worth at $4.5 billion. He is No. 324 on the worldwide list of billionaires and No. 113 in the United States. Early in his campaign, the Republican president-elect said he was worth in excess of $10 billion, and he reiterated that claim on May 17 when he submitted an updated financial disclosure to the Federal Election Commission.” (Fortune)
  8. Here’s what’s the city thinks each NYC borough is worth “The city’s Department of Finance estimates that all New York’s real estate put together is now worth $1.16 trillion (go figure). But not all boroughs are created equally. The agency gave The Real Deal a breakdown of how the boroughs changed in market value over the last year as part of their annual property tax assessment. The total value of real estate in Manhattan might seem impossible to compute, but the city pegs it at $455.22 billion for all four combined property classes. That number, for fiscal year 2018, represents an 8.24 percent increase from $420.55 billion the year prior. Property values blew up most in Brooklyn, rising 14 percent year-over-year to cross the $300 billion mark for the first time, DOF data show. Queens came in third, with its real estate valued at$267.73 billion, up 5.34 percent year-over-year.” (The Real Deal)
  9. Yardi Matrix: Stabilized Portland “The ‘Silicon Forest’ still appeals to young professionals and continues to add jobs, especially in the booming business, education, health-care and tech sectors. But after more than a year of double-digit rent increases, growth is finally starting to slow down. Though multifamily demand remains elevated, fueled by a healthy job market and a constant influx of Millennials, increasing development and affordability issues have brought gains to a more sustainable level. Portland’s healthy economy continues to attract investment as well as development, and a new wave of office construction is overtaking the central business district (CBD) and Northeast submarkets. Major companies such as Beaverton-based Nike and Under Armour are expanding, adding jobs and further boosting multifamily demand. The supply delivered in recent months has not been able to temper demand, and more than 24,000 units are still in the pipeline. The opening of the new Portland-Milwaukie MAX Orange line and the approval of the city’s West Quadrant development plan are likely to spur waterfront development and draw investor interest.” (MultiHousing News)
  10. ‘Tribal chic’ design is planned for Miami tower on 2,000-year-old Tequesta site “An architecture firm designing an apartment complex on what was once a Native American village in downtown Miami has dubbed its interior design ‘tribal chic,’ saying the concept was inspired by South Florida’s Tequesta tribe. But, strangely, and perhaps showing questionable taste, an interior rendering shows artwork drawn mainly from the American Southwest. Quicker than you can say ‘cultural appropriation,’ online commenters began poking fun at the idea. Robert Carr, Miami-Dade County’s former chief archaeologist, was also left scratching his head. ‘There’s nothing Tequesta about it except for the ground underneath their building,’ said Carr, who led an excavation that unearthed the foundations of 11 Tequesta structures and thousands of artifacts near the mouth of the Miami River.” (Miami Herald)
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