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10 Must Reads for the CRE Industry (January 14, 2019)

Janet Yellen has said it’s possible there will be no more interest rate hikes this cycle, reports CNBC. Bay Area apartment rents are on the rise again, according to the San Francisco Chronicle. These are among today’s must reads from around the commercial real estate industry.

  1. Janet Yellen Says It’s ‘Very Possible’ the Fed has Made its Last Hike of This Cycle “The Federal Reserve already could be at the end of its rate-hiking cycle, Janet Yellen, former central bank Chair Janet Yellen said Monday. ‘If there is a downturn in the global economy and that spills into the U.S. ... It’s very possible we may have seen the last interest rate hike of this cycle,’ she said at the National Retail Federation’s annual Big Show event in New York. If Yellen is accurate, her views would fit into the market’s thinking but would be contrary to expectations from Fed officials themselves.” (CNBC)
  2. Amazon Nears Deal to Lease Space in Chrysler Building “Much-in-the-news Amazon is close to signing a lease for a large store at the much-in-the-news Chrysler Building, The Post has learned. The deal for about 10,000 square feet at the corner of Lexington Avenue and East 42nd Street is not final. But retail sources predicted it will be done soon. The prospective move comes as the landmark Chrysler tower is being put on the sale block by its owners, Abu Dhabi Investment Council and Tishman Speyer.” (New York Post)
  3. Sears Bankruptcy Raises Old Questions About Cost of Going Broke “Sears has survived the Great Depression and world wars. Whether the 126-year-old retailer stays afloat or goes out of business now hinges in part on paying for the enormous bill piled up by going broke. The fate of Sears Holdings Corp highlights a harsh reality of U.S. bankruptcy - it requires armies of pricey specialists in a system driven by an outcome, not costs. On Monday, Sears will consider bids for its assets, including a last-ditch $5 billion proposal by chairman and controlling shareholder Eddie Lampert.” (Reuters)
  4. New York Empire of Illegal Airbnb Rentals Booked 75,000 Guests, Suit Says “Over the years, tenants of a red brick residence in the Kips Bay neighborhood of Manhattan had begun noticing a growing number of people with suitcases cycling in and out of their 18-story building every weekend. Many residents said they often heard the sound of luggage being rolled down the hallways of the 126-unit building. The most observant tenants speculated as to whether some of the people they had seen in the building were tourists who had booked apartments through Airbnb.” (The New York Times)
  5. After Lull, Bay Area Rents Are Rising Again, But Not Like Before “After two years of low to negative growth, Bay Area rents picked up steam in 2018, especially in the second half of the year, according to a quarterly survey of large apartment complexes by RealPage, a real estate analytics firm. The average Bay Area asking rent grew 4 percent in the fourth quarter from the same period in 2017, its fastest pace in almost three years. But it’s still not close to the stratospheric rates that persisted from 2011 through 2015, when they often reached into the double digits.” (San Francisco Chronicle)
  6. Gymboree Expected to File for Bankruptcy for Second Time in Two Years “Children’s clothing retailer Gymboree Group Inc. is expected to seek bankruptcy protection this week, with plans to close all 900 of its stores, according to people familiar with the matter. The expected bankruptcy comes less than two years after the retailer’s first stint in bankruptcy court, when it closed a portion of its stores and saw lenders take control of the business. The stores operate under the banners Gymboree, Janie and Jack and Crazy 8. In December, Gymboree announced it began a strategic review of the three brands, which could result in a sale or other transactions at the brand level.” (Wall Street Journal, subscription required)
  7. Most Commercial Lenders in U.S. Expect Originations to Increase in 2019 “According to the Mortgage Bankers Association's newly released 2019 Commercial Real Estate Finance Outlook Survey, commercial and multifamily mortgage originators in the U.S. expect 2019 to be another strong year in lending activity. More than half of the top commercial/multifamily firms (55 percent) expect originations to increase in 2019, with one-in-eight (13 percent) expecting an overall increase of 5 percent or more across the entire market. When forecasting just their own firm's originations, nearly two-in-five (38 percent) expect to see an increase of 5 percent or more in 2019.” (World Property Journal)
  8. Amazon-Owned Whole Foods Scraps Smaller 365 Store Expansion “Whole Foods Market once had an ambitious plan to broaden customer appeal with its 365 stores. But now it’s saying goodbye to the cheaper and smaller store format. Whole Foods CEO John Mackey told employees the grocery chain will not open new Whole Foods 365 stores anymore, according to an internal email reviewed by Yahoo Finance. The existing 12 stores, the newest of which just opened in Atlanta in December, will remain in business. Mackey said the main reason behind the strategy shift is Whole Foods’ prices.” (Yahoo! Finance)
  9. Hurdles Remain as Historic Hearst Building in SF Seeks Hotel Conversion “A years-long effort to convert the historic Hearst Building into a hotel in downtown San Francisco faces opposition from neighbors and design challenges related to existing long-term leases. The 1909 building at 5 Third St. was once home of the San Francisco Examiner and currently includes offices and retail shops. In 1938, famed architect Julia Morgan redesigned the building’s entrance, lobby and roof.” (San Francisco Chronicle)
  10. New Circa Resort & Casino to Open in Las Vegas in 2020 “Las Vegas’ newest resorts will be opening in downtown, not on the Strip. Circa Resort & Casino will tower over the Fremont Street Experience when the 44-story hotel opens next year. Also, the Downtown Grand Hotel & Casino will add a third tower, bringing an additional 495 rooms. An entire city block has been razed to make way for Circa, which started work last year. When it opens in December 2020, Circa will become the first new build in downtown Vegas in 40 years.” (Los Angeles Times)
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