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10 Must Reads for the CRE Industry Today (December 3, 2018)

New York State Senator Michael Gianaris has drafted legislation to prevent real estate deals based on non-public government actions, reports the Wall Street Journal. IKEA will open a story near Central Park, according to Fast Company. These are among today’s must reads from around the commercial real estate industry.

  1. After Amazon HQ2, Uproar in New York Over Real Estate ‘Insider Trading’ “Amazon.com Inc.’s deal for a second headquarters in Long Island City, N.Y., has prompted a state senator to draft legislation that would prohibit the buying or selling of real estate based on any nonpublic government action. Sen. Michael Gianaris, a Democrat who represents Long Island City, is drafting the proposed law. It would make such real-estate transactions a felony punishable by up to four years in prison.” (Wall Street Journal, subscription required)
  2. What the Trade War Means for REIT Investors “The U.S. hasn’t seen a large and protracted trade war since the early 1930s, which coincided with the Great Depression. With the U.S./China trade war escalating through most of 2018 it has been a confusing and scary time for all investors. There have been lots of contradictory claims from administration officials on both sides, trading apparently dovish claims of an imminent deal but also threats of ever-escalating tariffs and other punitive measures that could slow the economy of both countries.” (Forbes)
  3. Construction Spending Dips as Public Works Edge Out Private Sector Outlays “The numbers: Construction spending was at a seasonally adjusted annual $1.309 billion in October, 0.1% lower than a revised September spending pace of $1.311 billion, the Commerce Department said Monday. What happened: Any strength in October came from the government. Public outlays on construction projects were 0.8% higher than in September, while private sector spending was 0.4% lower. Both sectors were higher compared to a year ago, public spending by 8.5% and private by 3.9%.” (MarketWatch)
  4. IKEA Is Opening its First Store in Manhattan “The new location, which will open on the east side of Manhattan a few blocks from Central Park, will offer products tailor-made for city dwellers (read: furniture suited for tiny apartments). Plus, the company’s press release states that the new store ‘will give customers the opportunity to discover, select, and order Ikea products for delivery to their home, which is what urban residents want and need.’ It’s unclear whether that means everything at the store will be delivery only, or if people will still be able to walk out of the store loaded with boxes, but it’d be crazy to expect every shopper to lug their Ikea boxes home on the subway.” (Fast Company)
  5. Amazon’s HQ2 Sends Long Island City’s Home Prices Skyrocketing “Long Island City has become Prime investment property, thanks to Amazon. The already popular waterfront Queens neighborhood was named as the future home of Amazon’s Gotham headquarters last month — and buyers have been on a feeding frenzy ever since, local brokers told The Post. Demand has been so great since Amazon’s announcement Nov. 13 that one broker says he’s been working around the clock, seven days a week, leading dozens of mostly Chinese prospective investors on neighborhood tours in rented minivans.” (New York Post)
  6. Acquisition Yields Rise for Single-Tenant Medical Assets “In the third quarter of 2018, single-tenant net lease medical properties recorded a 22-basis-point year-over-year increase in cap rates, according to The Boulder Group’s latest Medical Sector Net Lease Report. The cap rate for single-tenant net lease medical properties priced below $10 million went from 6.25 percent in the third quarter of 2017 to 6.47 in the third quarter of 2018. The source of the increase is the rise of for-sale properties fitting a certain profile.” (Commercial Property Executive)
  7. Real Estate Firm Betting Big on Hudson Yards with New Deal “SL Green Realty Corp., New York’s largest office building owner, is making its biggest investment in the booming Hudson Yards area by acquiring a 91-year-old building in a deal that values the property at $440 million. The real-estate investment trust is buying a majority stake in the 21-story building at 460 W. 34th St. from the Kaufman Organization, which is holding on to a minority interest. The building, formerly known as the Master Printers Building, is across the street from the modern glass and steel towers rising in the sweeping Hudson Yards development from Related Cos. on what used to be 26 acres of windswept rail yards.” (Wall Street Journal, subscription required)
  8. Payless Scores with Mock-Up Luxury Shop “Payless ShoeSource created a viral sensation and earned widespread media coverage by opening a ‘fake luxury store’ and duping fashion influencers into purchasing Payless shoes at exorbitant prices. The store, named ‘Palessi’ after a made-up Italian designer, Bruno Palessi, opened in a former Armani store in Santa Monica, CA. The company designed a luxury setting to support the ruse, displaying shoes on glass shelves and gold mannequins, launching a sleek website and Instagram account, and bringing in camera crews and velvet ropes for the grand opening.” (Retail Wire)
  9. A Commercial Mortgage REIT That Yields 9% “Earlier this year I wrote a Forbes.com article on commercial mortgage REITs and I explained that ‘the risk with balance sheet lenders is relatively straightforward – the risk that loans don’t perform as expected.’ Unlike the more volatile residential mortgage REITs, ‘pure play’ balance sheet lenders aren’t exposed to the volatility and disruption related to securitization, and this makes them more attractive and less likely for dividend cuts.” (Forbes)
  10. 2018 CRE Performance Recap: UBS “The commercial real estate industry is changing rapidly, as shown by UBS’ Real Estate and Private Markets’ Real Estate Summary 2018, that takes a global overview, as well as an inside look into how the U.S., Europe and APAC regions have performed throughout the year. In 2018, there have been several risks within the market, despite an overall positive outlook. The trade war with China continues to escalate and tariffs pose a larger problem down the line, if not resolved.” (Commercial Property Executive)
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