10 Must Reads for the CRE Industry Today (November 14, 2016)

10 Must Reads for the CRE Industry Today (November 14, 2016)

 

  1. Kenneth Cole Is Shutting Down All Of Its Outlet StoresIf you love Kenneth Cole outlet stores, you better shop fast: The fashion retailer is shutting down almost all of them within the next six months. Closing its outlet stores comes as the company is 'focusing its efforts on its e-commerce site and international business,' Kenneth Cole CEO Marc Schneider first told Bloomberg. ‘As we continue on our path of strengthening our global lifestyle brand, we look to expand our online and full-price retail footprint across the globe,’ he said. ‘We need to focus our energies and resources to better serve the consumer on their terms.’ After the company shuts down its 63 outlet stores, it will have only have two-full priced stores left in the U.S.—one in New York’s Bowery neighborhood and the other in Arlington, Virginia, according to Bloomberg.” (Fortune)
  2. Kroger excited about new presidential administration “Will President-elect Donald Trump be good for Kroger’s business? The retailer’s stock has enjoyed a sharp rise since Trump was named the 45th president. ‘Well, so far it certainly looks that way,’ Kroger CEO Rodney McMullen said during an interview on CNBC. ‘We look forward to working with the administration and getting the growth again and more jobs started, so it’s exciting.’ McMullen said job growth is what he is looking forward to the most when the new administration gets to work in January. “One of the key things is creating stability and confidence to spend and invest for the future.” However, there is one headwind standing in Kroger’s way. Food deflation, or a decline in the price of products, is a near-term challenge, McMullen said.  ‘If you look at the last 25 or 30 years, we’ve had three periods of deflation in grocery,’ he said. ‘This is the third time. Typically it lasts three to five quarters and we’re in the middle of that process right now.’ McMullen added going through a period of food deflation is ‘no fun,’ but Kroger will get through this period and continue to grow.” (Chain Store Age)
  3. Economy Watch: Restaurant Chains Suffer From Declining Traffic “The health of the restaurant industry, a subset of retail, is a reflection of consumer attitudes, since generally speaking, spending of that kind is entirely discretionary. High spending and growth among restaurant chains points to optimism, while lower spending and contraction among the chains points the opposite direction. Growth hasn’t been particularly robust for the industry lately. The downturn for most of the restaurant industry continued during September, according to data reported by TDn2K through The Restaurant Industry Snapshot late last week. The figures are based on weekly sales from nearly 25,000 restaurant units and more than 130 brands, representing $64 billion dollars in annual revenue. Among that sampling, same-store sales were down 1.1 percent for the month, which is down for the fourth consecutive month, and chain restaurants suffered another period of dropping guest counts. Even restaurant job growth, which until recently had been posting solid gains, is down. The key driver behind the fall in sales during September was a decline in traffic, which continues to be the biggest challenge for chain restaurants, according to Victor Fernandez, executive director of insights and knowledge for TDn2K. After improving slightly in August, traffic fell 3.5 percent in September.” (Commercial Property Executive
  4. Economists Give Their REIT Predictions “Equity REITs recently came into their own as virtually the only companies in a standalone real estate sector in the closely watched Global Industry Classification Standard (GICS®), the leading classification system for stock exchange-listed equities worldwide. The move has drawn fresh attention to the space. Industry watchers expect property values to continue rising, fueling strong quarterly results that reward investors with increased share prices and healthy dividends...furthermore, investment from across the globe should continue. To be sure, it remains to be seen how long such robust growth can be sustained, and some observers question whether some types of real estate have peaked. Regardless, two things remain certain. First, technology will continue reshaping the space. ‘The speed at which technology alters our behavior will continue at an accelerating pace, which impacts essentially all commercial sectors,’ says Jeffrey Horowitz, the global head of real estate, gaming and lodging investment banking at Bank of America Merrill Lynch. Second, real estate developers and investors will continue catering to millennials. This group is having a dramatic impact on REITs ranging from apartment companies, which are designing units to meet their needs, to new growth in REITs catering to the explosion of e-commerce. NAREIT spoke with five economists to get their thoughts on what to expect in real estate next year and in the near future.” (REIT.com)
  5. Providers Slam Discounting, Embrace Other Pricing Approaches “As competition heats up within the senior housing industry, some companies are doing their best to cool down one common practice—discounting their prices. Discounting rents or offering similar financial incentives has become commonplace to persuade prospective residents into moving into a senior living community. The practice was particularly prevalent in the years immediately following the recession, as providers needed to boost occupancy during a time when the state of the housing market may have prevented some seniors from selling their home and moving into a senior living community. But the reality is that the impact of discounting can be far-reaching and may undermine the value of senior housing. ‘Discounting can send the wrong message and create doubt,’ William Nowell, founder of Peak Performance MS, a provider of mystery shopping, marketing improvement and sales performance improvement programs, said during a recent webinar on the topic. ‘Customers that buy our product for the wrong reasons tend to be harder to satisfy and more dissatisfied as time goes on.’” (Senior Housing News)
  6. Lawmakers in no rush to finalize 421a deal “State lawmakers see no reason to hightail it back to Albany for a special session to get the new 421a law on the books, despite urgings from Gov. Andrew Cuomo. The Real Estate Board of New York and the Building and Construction Trades Council of Greater New York last week announced they had reached an agreement to revive the expired tax exemption. But the deal still has to be passed through the state Legislature and signed by Cuomo, and lawmakers said they have no plans to rush back to get it done by the end of the year.” (The Real Deal)
  7. The industry’s climate change complacency “When millions of gallons of briny water gushed into the lower reaches of 80 Pine Street on October 29, 2012, concrete walls buckled, electrical systems shorted out and several maintenance workers briefly found themselves trapped. That nightmarish scene in the Financial District was just one of many faced by building owners in the city in the wake of Superstorm Sandy. All told, their losses came to an estimated $8.6 billion. Given the scale of that hit, one would think that developers today would be wary of pouring cash into the city’s most vulnerable neighborhoods. But surprisingly, for better and for worse, that has not been the case. Take Rudin Management, the private, family-run company that owns 80 Pine Street. Just three years after Sandy, the developer joined with Boston Properties to buy a 99-year ground lease on Dock 72 at the Brooklyn Navy Yard. There, they plan to put up a 556,000-square-foot office project on a dock surrounded by water on three sides. Not surprisingly, the site lies in in Flood Zone A, a designation reserved for areas at the highest risk. ‘There are tradeoffs in life,’ William Rudin, CEO of Rudin Management Company, told The Real Deal. ‘It’s beachfront property. There are risks and rewards. You do what you can to mitigate the risks.’” (The Real Deal)
  8. What will Trump’s presidency mean for Miami’s real estate?  “The king of real estate is set to rule the country, but what will a Donald Trump presidency mean for local real estate, one of South Florida’s biggest industries? We wanted to gauge response from Realtors, developers, economists, bankers and lawyers about possible impacts of the election, both in the short and long term.  We asked: Will a new president — especially a political unknown like Trump — mean uncertainty for Miami real estate? What will the election’s impact be on sales and developer activity? We also wanted to know their views on whether Latin American investors would hesitate to invest in President Trump’s America after his strong anti-immigration stance. Will his election depress demand from Latin American buyers? Overall, those who responded are mostly bullish, as you might expect from businesspeople who depend on optimism and consumer confidence for sales. We’ve selected a representative sampling of the views expressed and excerpted comments they made, mostly via email. (Thanks to the team at Bendixen & Amandi, our partners on our annual Real Estate survey, which helped us put out the word.)” (Miami Herald)
  9. Foreign investors pouring billions into Seattle commercial real estate “In Seattle’s feverish world of real estate, much of the focus on foreign investment has been centered on international buyers scooping up homes. But most of the foreign money is actually flowing into other parts of the market, from Amazon offices to new apartment towers. Historically seen as a second-tier city to foreign interests, Seattle and its suburbs are now being looked at much more closely by overseas developers and commercial real-estate investors, data and broker interviews show. And while Europe and Canada are still eyeing Seattle, the biggest increase seems to be coming from China and other Asian countries. Excluding houses, foreign investors have bought more than $4 billion worth of big-ticket buildings like offices, apartment and condo complexes, and warehouses in King County since 2015. That’s more than triple the rate from earlier in the decade, according to the local Economic Development Council. And it’s more money than what foreign buyers spent on local homes during that span.” (Seattle Times)
  10. The CHA tests a controversial timer on housing vouchers “The Chicago Housing Authority is preparing to roll out a pilot program that would cut off housing vouchers for some people after eight years, an attempt to nudge more recipients into the workforce and shrink the long waiting list for rental assistance. The CHA has asked the U.S. Department of Housing and Urban Development to approve its plan, which would impose the time limit on 100 families, a fraction of the 46,000 Chicago voucher holders today. The program also would include training and other services to prepare them for the job market. Though it's small, the initiative rekindles the long-running debate over the purpose of welfare programs, with conservatives saying they should provide a temporary safety net and steps to self-sufficiency and liberals saying that things like time limits don't take into account the difficult circumstances many recipients face. The proposal also comes at a time when federal housing policy is expected to take a more conservative turn as Donald Trump becomes president and changes HUD leaders. The CHA's goal is to determine if time limits can help voucher holders "more easily and quickly move up the economic ladder so they are no longer in need of" the subsidy, according to a statement. That could free up more vouchers for nearly 43,000 people on CHA's voucher waiting list.” (Crain’s Chicago Business)

 

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