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10 Must Reads for the CRE Industry Today (January 30, 2019)

The Wall Street Journal looks at how the Fed holding off on rate increases might have negative consequences. Amazon is trying to improve its image in New York City as it prepared to move in, reports The New York Times. These are among today’s must reads from around the commercial real estate industry.

  1. What Could Go Wrong with the Fed on Hold “The first scenario is both the best outcome, and potentially the worst. If the economy slows to its sustainable trend the Fed can keep monetary policy on hold indefinitely. The disparate effects of higher rates in 2018, such as Turkey’s troubles with the strong dollar, the collapse of volatility-related structured products or the slowdown in U.S. housing and car sales, need not be repeated. However, if the economy slows to trend, investors are quite likely to mistake the slowdown for the end of the cycle, and panic.” (Wall Street Journal, subscription required)
  2. Amazon Has a New Strategy to Sway Skeptics in New York “The company offered a few salves to skeptics on Wednesday at a City Council hearing: It will hire public housing residents to work at a new 30-person customer service center and establish a certificate program at LaGuardia Community College to help students gain entry-level technology jobs. The company also announced that it would fund computer science courses at more than 130 New York high schools. But Amazon executives, during their testimony, referred obliquely to the company’s displeasure at the local opposition that has greeted and appeared to entertain the idea of backing away from the deal.” (The New York Times)
  3. The Crucial Real Estate Deal Component Most Investors Miss “If you’re like most real estate investors, you probably receive deal packages from real estate syndicators, also known as sponsors, on a regular basis. Often, these packages contain executive summaries that position the deals as excellent investment opportunities. This should come as no surprise, as the job of the real estate sponsor is to screen out the bad and average deals and only focus on deals that present true opportunity.” (Forbes)
  4. Pending Home Sales Drop in December Despite Much Lower Interest Rates “House hunters signed 2.2 percent fewer contracts to buy existing homes in December, according to the National Association of Realtors. These so-called pending sales are a future indicator of closings in one to two months. The Realtors’ pending home sales index was also down a dramatic 9.8 percent compared with December 2017. This marks 12 straight months of annual declines. It is also the lowest December sales reading since 2013.” (CNBC)
  5. Landlords Relish—Or Fear—J.C. Penney Store Closings “No one knows how many stores the struggling J.C. Penney Co. may shut this year. But landlords aren’t waiting around to find out if theirs will be among the closures. Property owners of vibrant malls are already seeking better-paying tenants, while the less successful ones are considering rent cuts or other incentives if they fear a new anchor tenant would be tough to land, landlords and analysts say. Sales have been falling at J.C. Penney, which has more than 860 stores in shopping centers across the U.S. and Puerto Rico.” (Wall Street Journal, subscription required)
  6. Foxconn May Not Build $10B Plan Trump Touted “Foxconn is reconsidering plans to make advanced liquid crystal display panels at a $10 billion Wisconsin campus, and said it intends to hire mostly engineers and researchers rather than the manufacturing workforce the project originally promised. Announced at a White House ceremony in 2017, the 20-million square foot campus marked the largest greenfield investment by a foreign-based company in U.S. history and was praised by President Donald Trump as proof of his ability to revive American manufacturing.” (NBC News)
  7. From Dead Mall to Amazon Warehouse: Here’s How Shuttered Retail Stores Are Getting a New Life “An old Toys R Us store in Milwaukee is now home to Engine & Transmission Exchange, a remanufacturer for car parts. Meanwhile, six dead malls across the U.S. are either in the process of being turned into or have been revamped as massive manufacturing plants and logistics hubs. The empty Euclid Square Mall in Euclid, Ohio, for example, is planned to be demolished to become home to a new Amazon e-commerce fulfillment center. And that’s after Amazon already moved into a new facility where Randall Park Mall used to sit in North Randall, Ohio.” (CNBC)
  8. The Closing: Eliot Spitzer “Eliot Spitzer needs little introduction. Most know him as the New York governor who resigned in the wake of a prostitution scandal in 2008. But the 59-year-old — who has reinvented himself several times over — now runs the real estate firm his late father, Bernard, founded in the 1950s. Spitzer got his start in the public sector as a young lawyer in Manhattan District Attorney Robert Morgenthau’s office, where he prosecuted mob cases in the early 1990s.” (The Real Deal)
  9. TAMI Sector Fuels LA Office Leasing in 4Q: Savills Studley “Los Angeles may not have made the final cut in the race for Amazon’s second headquarters stake, but expansions by several Fortune 500 companies in the technology, advertising, media and information, or TAMI, sector, has more than compensated, according to a fourth-quarter 2018 L.A. office market report from Savills Studley. Meanwhile, more traditional industries, including banking, legal and professional business service firms, hedged their bets by signing fewer leases and smaller deals in fourth-quarter 2018.” (Commercial Observer)
  10. Kenmore Square’s Tallest Tower Would Stretch to Nearly 300 Feet Under New Plan “A triangular building reaching nearly 300 feet and housing a luxury hotel would shoot from the intersection of Commonwealth Avenue and Beacon Street in Kenmore Square under plans that were unveiled January 29. Robert Korff, who owns the Citizens Bank building at the same intersection, sees the tower rising just ahead of a sizable public plaza and just in front of a new street his development would create to connect Commonwealth and Beacon and to thereby divert traffic from an existing five-way intersection.” (Curbed Boston)
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