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10 Must Reads for the CRE Industry Today (Feb. 5, 2020)

The drop in Chinese tourism is starting to affect hotel occupancy rates in major U.S. cities, reports The New York Times. Macy’s is closing its tech offices in San Francisco, according to CNBC. These are among today’s must reads from around the commercial real estate industry.

  1. Chinese Lead Foreign Selling of U.S. Commercial Properties “Chinese investors sold off billions more in U.S. commercial property last year than they bought, as other foreigners start to sour on the U.S. market as well. Foreign investors were net sellers of U.S. commercial real estate last year for the first time since 2012, posing a fresh setback for a market that is already showing signs of strain. Chinese were by far the biggest foreign sellers of U.S. office towers, retail centers, hotels and other commercial property last year, unloading $20 billion more than they bought, according to data from Real Capital Analytics.” (Wall Street Journal, subscription required)
  2. Without Chinese Tourists, Business Sags “The manager of a hotel near Newark Liberty International Airport that relies on tourists from China estimated the loss from the coronavirus outbreak at ‘well over $100,000 and climbing.’ A company that arranges Chinese-language bus tours of the sights in Manhattan is dealing with as many as 300 cancellations from Chinese tourists who cannot come to New York this week.” (The New York Times)
  3. The Rent Is Too Damn High—Even for Middle-Income Americans “Being able to pay for housing — along with the rest of one’s everyday expenses — is a challenge for many Americans. And increasingly, that includes middle-income Americans. A new report from the Joint Center for Housing Studies of Harvard University calculates that 10.9 million renters spent more than 50% of their income on housing in 2018. That equates to one in four renters. Moreover, there were 6 million more cost-burdened renters in 2018 than in 2001.” (MarketWatch)
  4. Property Investors Lure Startups with Shortcut to Public Listing “After WeWork’s ill-fated attempt to go public last year, some prominent investors are courting other fast-growing real-estate firms with an alternative path to the stock market. The investors aim to help late-stage startups go public through an entity known as a special-purpose acquisition company, or SPAC. These listed entities, also referred to as blank-check companies, exist for the sole purpose of merging with a private business to take it public. While these companies list on a Nasdaq exchange and other exchanges, most of their money sits in an escrow account until a target is found.” (Wall Street Journal, subscription required)
  5. Macy’s to Shut San Francisco Tech Offices, Cut Some Jobs “Macy’s is shuttering its tech offices in San Francisco, a spokeswoman confirmed to CNBC, in a bid to streamline its business. The department store chain said it will offer severance to eligible staff at the offices, which sit at 680 Folsom, and some workers will be able to transfer. Macy’s said its operations in these offices, which include product and digital revenue segments as well as its online and technology groups, are moving to New York City and Atlanta.” (CNBC)
  6. Another Hub for Tech in Miami? A Growing Company Found a New Home in the Grove “Coconut Grove has what tech teams are craving. And some are willing to pay a premium to get it. The growing company Taxfyle, which provides an on-demand tax filing app, signed a three-year lease for 13,959 square feet in Coconut Grove in December. It moved to a Class A space in the Mayfair in early January. The new space is about three times bigger than the Coral Gables office it left at 2903 Salzedo St.” (Miami Herald)
  7. Sephora Preps for Record-Setting Store Expansion “A specialty beauty powerhouse will open the most North American stores in a single year in its history. Sephora will open 100 new store locations across North America in 2020, more than it has opened on the continent in any prior year and more than double the number of openings from 2019. The stores will be located in street and local centers, as well as a mix of new and established shopping centers.” (Chain Store Age)
  8. Pass the Joint: JV Equity Partnerships Are All the Rage “In 2019, two major investment firms split a Coke in Midtown. Specifically, the Coca-Cola Building at 711 Fifth Avenue. It was bought by Nightingale Properties, a New York owner, and Wafra Capital Partners, a Kuwaiti-backed investor, for $909 million. This was one of the more prominent sales in New York last year, and not just because the following month the property mysteriously changed hands yet again with New York real estate bad boy Michael Shvo picking it up for $955 million—giving a tidy $46 million profit.” (Commercial Observer)
  9. Will Construction Costs Continue to Rise in 2020? “Construction costs continued to climb again last year after years of rapid growth, but could that change in 2020? The new construction pipeline is growing as a result of opportunity zone activity, and in 2020, new construction activity will continue to grow. However, Richard Lara of RAAM Construction doesn’t expect the increase in activity to put pressure on construction costs. However, they will continue to be a top concern for developers.” (GlobeSt.com)
  10. Avison Young Buys Washington, D.C. Firm “Avison Young has expanded its presence in Washington, D.C., with the acquisition of BMS Realty Services LLC, a leading property management firm. BMS has been serving the metropolitan Washington, D.C.-area from its location in the District since 1999. The firm specializes in providing private owners, institutions and not-for-profit organizations with a broad range of value-driven services designed to optimize building performance, promote tenant retention and enhance long-term property value.” (Commercial Property Executive)
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