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10 Must Reads for the CRE Industry Today (January 6, 2017)


  1. Wage growth may spur Fed into quicker action “The strong wage growth seen in the December jobs report is a sign that the central bank should continue raising interest rates, economist said. Nonfarm payrolls rose by 156,000 in December, the Labor Department said. Wage growth picked up, bouncing to a seven-year high of 2.9% year-on-year. 'In short, the report tells the Fed not to delay further tightening,' said Ian Shepherdson, chief economist at Pantheon Macroeconomics. Shepherdson said he thinks rates will rise again as soon as March, provided there is some clarification of President-elect Donald Trump’s fiscal policy program by then. Steve Ricchiuto, chief U.S. economist at Mizuho, said the jobs report justifies the Fed’s expectation of three rate hikes this year.” (MarketWatch)
  2. Trump, Republican-Controlled Congress to Boost U.S. Commercial Markets in 2017 “According to global commercial real estate consultant Cushman & Wakefield's latest U.S. Macro Forecast; following a turbulent year in 2016, the U.S. economy and commercial property markets are positioned to perform well in 2017. ‘Even before the election, the U.S. economic fundamentals were showing signs of heating up,’ said Kevin Thorpe, Cushman & Wakefield's Global Chief Economist. ‘We observed a big GDP number in Q3, accelerating wage growth, surging consumer confidence - a string of really robust trends were already forming.  Now when you layer in the expected tax cuts and spending multipliers from the New Administration, it creates an even stronger economic backdrop for the property markets heading into 2017.’ Although it will take time for policy to form, Cushman & Wakefield expects that President-elect Trump, alongside a Republican-controlled House and Senate, will deliver fiscal stimulus measures that will further boost the U.S. economy and property markets. That said, Thorpe notes that some of the expected growth in fiscal policy will be negated by tighter monetary policy, higher interest rates, higher inflation and more global volatility. On net, Cushman & Wakefield forecasts the U.S. real GDP will grow by an upwardly revised 2.3 percent in 2017, and will hit 3.0 percent in 2018.” (World Property Journal)  
  3. Department Stores, Once Anchors at Malls, Become Millstones “For decades, a corner spot at the mall was a sure path to success for big American department stores like Macy’s. Not anymore. Those stores have been outmaneuvered by online retailers like Amazon and discount retailers like T. J. Maxx. And now the pace of change is accelerating, transforming the retail industry faster than expected. The results? A rude awakening for some of the country’s biggest retailers. And for malls, a reshaping that, in many ways, mirrors a growing economic divide. Macy’s said this week that it would cut more than 10,000 jobs as part of a previously announced plan to close 100 stores and cut other costs. And the long-struggling Sears Holdings said Thursday that it would close 150 more stores and that it had sold its nearly century-old Craftsman brand to Stanley Black & Decker. They are the latest in a slow bleed of similar announcements in the past two years from rivals including J. C. Penney.” (The New York Times)
  4. Add J.C. Penney to the List of Retailers With Awful Holiday Sales “So much for being retail's comeback kid. J.C. Penney on Friday reported weak holiday season sales, becoming the latest department store chain to disappoint investors with a lackluster performance despite forecasts for the best Christmas period for retail overall in years. The retailer said comparable sales, which include e-commerce and sales at stores open at least a year, fell 0.8% in November and December. Penney's report comes two days after Kohl's and Macy's each reported that comparable sales fell 2.1% over the holidays, and Sears said they fell 13%. Penney's holiday numbers were all the more disappointing given its strong performance a year earlier. Penney shares were down 5% to $7.56 in premarket trading, continuing a 7% decline on Thursday when many retail stocks plunged.” (Fortune)
  5. PREIT gets proactive in replacing Sears stores “PREIT CEO Joseph Coradino is pursuing a take-charge course in dealing with department store attrition, announcing that his company is actively pursuing replacements for three Sears anchors he expects to close in 2017. A yet-to-be-named fashion department store has been lined up to replace Sears at Woodland Mall in Grand Rapids, Michigan, Coradino said. He added that Sears spaces are actively being shopped at Capital City Mall in Camp Hill, Pennsylvania, and Magnolia Mall in Florence, South Carolina. ‘These store recaptures are an opportunity to continue to enhance the shopper experience, drive traffic, and create value,’ Coradino said. A former Sears space at PREIT’s Viewmont Mall in Scranton, Pennsylvania, is being replaced by Dick’s Sporting Goods, Field & Stream, and HomeGoods. Construction of a Whole Foods is underway at a vacated Kmart site at the company’s Exton Square in Chester County, Pennsylvania.” (Chain Store Age)
  6. Here is one area of New York City real estate that’s slowing down “It used to be that 85% of apartments in New York City were co-ops. But not any longer. City slickers aren’t as willing to pay their higher monthly fees — or deal with their persnickety boards. Luxury co-ops, those selling for $4 million or more, were more sluggish than they’d been in any fourth quarter over the last five years, according to The Wall Street Journal. Residents of co-ops, which are units in buildings or property managed by a board, aren’t typical homeowners: instead of the individual or family owning the apartment they inhabit, they own shares of a larger corporation — which in most cases, is the building. With it comes a lower price tag but higher monthly payments than other living arrangements and headaches like bigger maintenance fees, and more rules on what residents can and can’t do in their homes and on the property.” (MarketWatch)
  7. Port Authority Approves $32 Billion to Improve Bus Terminal, Airports “The Port Authority of New York and New Jersey on Thursday approved a preliminary 10-year, $32 billion plan to fund a new Port Authority Bus Terminal and renovate New York’s airports, among other projects. The proposed capital-works plan now goes through a public comment period before the board votes in February. The governors of New York and New Jersey can veto it. The plan was held up in December, when it first came before the board, amid battles over replacing the aging bus terminal in Manhattan. New York and New Jersey officials have been sparring over what percentage each side should pay for a terminal that is in New York but primarily serves New Jersey passengers. The terminal sees some 115,000 commuters daily and the number is expected to grow. The structure in the draft plan approved Thursday has New York paying one third of $3.5 billion toward the project, with New Jersey the remainder. It is still short of the $10 billion the project is estimated to cost over a decade. Port Authority officials are expecting the federal government to step up with funding.” (The Wall Street Journal)
  8. Mesa West Capital Closes $900M Fund “Mesa West Capital has closed its largest closed-end real estate debt fund, reaching a hard cap of $900 million in equity commitments for its Mesa West Real Estate Income Fund IV LP. This is its fourth fund overall and surpassed its original $750 million target. ‘For this particular fund, we will continue to provide short-term non-recourse first mortgage debt ranging from $20 million to $300 million for the acquisition, refinancing and recapitalization of institutional quality real estate assets in transition,’ Ryan Krauch, Mesa West Capital’s principal, told Commercial Property Executive. ‘Fund IV allows us to continue the successful lending product that we have been providing to the market for the last 13 years—and given the size we will be able to accommodate even more clients and better serve the market.’” (Commercial Property Executive)
  9. Last year's record building buys set the stage for 2017 With billions of dollars of North Texas building sales on the books for last year, agents and investors are hoping more big buys are coming in 2017. Higher finance costs and a slower pace of properties coming on the market could reduce the deal total for this year, some forecasters say. But Dallas-Fort Worth's booming economy is likely to attract more real estate investors from around the world. ‘2016 was a record year for sales,’ said Gary Carr, vice chairman with commercial property firm CBRE. ‘The previous high-water mark was in 2006 with $4.8 billion. Estimates for 2016 were approximately $5.6 billion in D-FW sales.’” (Dallas Morning News)
  10. Development proponents will not claim alarming report on Measure S was ‘independent’ “The fight over Measure S—a ballot measure that would curtail development in Los Angeles—continues to heat up. Just two months before the March 7 election, supporters and opponents clashed in court over language in the voter guide soon to be mailed to hundreds of thousands of registered voters. The two camps reached an agreement Wednesday, settling a lawsuit filed in December by supporters of Measure S, formerly known as the Neighborhood Integrity Initiative. Supporters claimed arguments prepared by opponents were exaggerated and misleading. Under the agreement, the measure’s opponents will soften their claims about a report analyzing the measure’s impact on the local economy. The voter guide will not refer to that economic analysis as “independent,” as the measure’s opponents had proposed. The study was prepared by consulting firm Beacon Economics and financed by two developers who oppose Measure S.” (Los Angeles Curbed)
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