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10 Must Reads for the CRE Industry Today (December 18, 2018)

REITs will likely outperform the broader stock market this year, the Wall Street Journal reports. Forbes looks at ways to find below-market investment opportunities. These are among today’s must reads from around the commercial real estate industry.

  1. Real Estate Stocks Beating S&P 500 for First Time Since 2015 “Real-estate investment trusts are on pace this year to outperform the broader stock market for the first time since 2015, as investors seek safety in high-yielding property stocks during the broader equities rout. These real-estate stocks look poised for another solid year, according to many analysts, as volatility shakes much of the rest of the stock market. With J.P. Morgan Chase estimating that REITs will offer dividend yields of 4% next year, that could appeal to investors when broad market indexes are under pressure.” (Wall Street Journal, subscription required)
  2. Saks Fifth Avenue to Close its Women’s Store, but Keep Its Men’s Shop at Brookfield Place in New York “Saks Fifth Avenue is shutting its women's store at Brookfield Place downtown in New York, roughly two years after it opened. But the luxury department store operator will be keeping the men's portion of this location open. The women's shop is set to close Jan. 5, a spokesperson confirmed to CNBC. The company said it had been using the store as a ‘test concept’ to learn about how women liked to shop in New York. It said it ‘determined that [its female customers'] preferred format is a combination of our digital channels and our iconic Fifth Avenue flagship.’” (CNBC)
  3. Five Ways to Find Below-Market Real Estate Opportunities “Unlike the stock market, your real estate investment is secured by a physical asset you can feel and touch. The best part about it is that you have control over your investment, whereas in the stock market, you have zero control over how your stock performs. So how do you go about finding great deals in real estate? Having been a real estate investor for nearly 15 years, I believe the way to find deals varies from each market cycle. In a buyer's market, for example, you can go to a multiple listings service and make 10 low offers, and one might get accepted.” (Forbes)
  4. Growing Glut of Office Supply to Pressure Rents Next Year “Next year could be a real slog for many office landlords. Developers are expected to add 68 million square feet of office space this year, the largest addition to U.S. inventory since 2008, said Revathi Greenwood, head of research for the Americas at real estate services firm Cushman & Wakefield. That crush of new supply is expected to pressure rent growth, especially for owners of older office buildings that will be hard-pressed to compete with amenities at the newer properties, analysts said.” (Wall Street Journal, subscription required)
  5. A Million California Buildings Face Wildfire Risk. “Extraordinary” Steps Are Needed to Protect Them “Minutes after fire broke out in Woolsey Canyon, a community 12 miles to the south went into action. Alerted by 911 calls they were monitoring on a red-flag day, volunteers with the Topanga Coalition for Emergency Preparedness headed to the town’s emergency operations center to open back channels to county sheriff’s and fire officials, answer hotline calls, tweet updates and, if it came to that, help send out the evacuation order. In one sense Topanga is a rarity — a hypervigilant community still roused by the memory of a 1993 fire that left three people dead and destroyed nearly 400 houses.” (Los Angeles Times)
  6. Houston’s Commercial Real Estate Market Still Recovering from Oil Downturn “Houston has, for the most part, survived the oil downturn, but some areas are still in recovery. Though Houston’s commercial real estate market is doing well overall, the office sector is still struggling with high vacancy rates. Eli Gilbert, director of research at commercial real estate firm JLL in Houston, said this has to do with oversupply and jobs lost during the downturn. Also, companies have learned to be more efficient with less space.” (Houston Public Media)
  7. Single-Family Home Construction Tumbles—and a Top Analyst Says Housing Is in a Correction “Each new housing data point is worse than the last, and they are prompting a leading industry analyst to say the market is in a correction. Single-family housing starts fell more than 13 percent year-over-year, according to the U.S. Census. Building permits, an indicator of future construction, were down nearly 2 percent. This followed a sharp drop in homebuilder sentiment to the lowest level in more than three years, according to the National Association of Home Builders.” (CNBC)
  8. Will EB-5 Stay Alive? “The failure of the planned New York Wheel, a giant Ferris Wheel planned on Staten Island, was a gut punch for the controversial EB-5 program. But it was not the only blow EB-5 has faced lately. That federal program — which provides green cards to foreigners who invest a minimum of $500,000 in qualifying real estate developments — is seeing serious setbacks. And developers may need to start weaning themselves off the capital source once referred to as the ‘crack cocaine’ of real estate financing.” (The Real Deal)
  9. Famed Real Estate Investor Feels ‘Vindicated’ After Judge Throws Out Lawsuit “A Miami-Dade Circuit Judge on Monday summarily dismissed a lawsuit against real estate developer Edgardo Defortuna that accused him of defrauding two lenders and one investor in his Jade Ocean luxury condo tower at 17121 Collins Avenue. Judge William Thomas ruled that the plaintiffs — Florida Beach Investment, Spartan Capital and Capital Building — had no evidence to support their claims that Defortuna and his company Fortune International Group misled them about their investment in the project.” (Miami Herald)
  10. Dollar Stores May Do Low Income Areas More Harm Than Good “Today, there are more dollar stores in the United States than all Walmarts and Starbucks combined. These low-priced “small-box” retailers, like Dollar General, offer little to no fresh food — yet they feed more Americans than either Trader Joe’s or Whole Foods, and are gaining on the country’s largest food retailers. Detailing the explosion of dollar stores in rural and low-income areas, the Institute for Local Self-Reliance (ILSR) recently released a report that shows how these retailers exacerbate economic and public health disparities.” (Eater)
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