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10 Must Reads for the CRE Industry Today (November 29, 2018)

Federal Reserve officials have outlined risks to the U.S. financial system, reports the Wall Street Journal. U.S. apartments are getting smaller, while rents are rising, according to MarketWatch. These are among the must reads for the commercial real estate industry today.

  1. Fed Identifies Top Vulnerabilities Facing U.S. Financial System “The Federal Reserve identified elevated asset prices, historically high debt owed by U.S. businesses and rising issuances of risky debt as top vulnerabilities facing the U.S. financial system, according to an inaugural financial stability report released Wednesday. Officials cited potential risks tied to nonfinancial corporate borrowing, including low premiums demanded by investors in certain business debt, such as leveraged loans and high-yield corporate debt. It also flagged possible concerns in commercial real estate, in which property prices have rapidly outpaced growth in rents.” (Wall Street Journal, subscription required)
  2. For Sears, Total Liquidation Is Among Options Being Weighted “Sears Holdings Corp. is considering offers from liquidators that would result in the closure of all its stores while Chairman Edward Lampert and Cyrus Capital Partners prepare a bid that would keep the bankrupt retailer in business, according to people familiar with the matter. Lampert, who believes a slimmed-down Sears can emerge from bankruptcy, and Cyrus are expected to make an offer for roughly 500 of Sears’s best-performing stores, the people said.” (MarketWatch)
  3. Retail Rents Fall Along Major Brooklyn Corridors “Retail rents plunged along major Brooklyn shopping corridors this summer, according to a report released Wednesday. The decline is part of a citywide correction to prices, which soared beyond what tenants could afford in the wake of the Great Recession, when many properties became overvalued and online shopping changed the fundamentals of brick-and-mortar retail. Average asking rents fell in half of the 16 corridors tracked by the Real Estate Board of New York, which released the retail study.” (Crain’s New York Business)
  4. Bad News for Renters: Apartments Are Shrinking and Getting More Expensive “Feel like your apartment’s walls are creeping in on you? You may not be imagining it. Since 2008, the average size of a newly-built rental apartment has shrunk by 52 square feet, or 5%, to 941 square feet, a new report from real-estate website RentCafe and data-analytics firm Yardi Matrix concluded. New studios and one-bedroom units have shrunk in size even more in that time span, by 10.3% and 4.2% respectively, while two-bedroom apartments are slightly larger on average. At the same time, new apartments have become much more expensive to rent — the average price has risen 28% over the last 10 years to $1,944.” (MarketWatch)
  5. Upscale Co-Working Firm Aims for Restart with New CEO, Funding “NeueHouse, which offers co-working space and a private-club membership, raised $30 million this month from outside investors and hired new leadership. Both moves are part of an effort to jump-start a company that has stalled while the popularity of shared office space has taken off. Most of the new funding was provided by the family office of media mogul Barry Diller and his wife Diane von Furstenberg, along with Hong Kong-based real-estate investor Gaw Capital Partners, according to NeueHouse. Mr. Diller made an initial $8 million investment in the company late last year.” (Wall Street Journal, subscription required)
  6. Physical Space for God’s Glory: A Story of Selling Church Property “Why do churches sell their property? Sometimes a congregation gets too small and too old and the church closes its doors. Sometimes there’s a split — folks disagree on doctrine or theology and a church sets sail for another seemingly friendlier denominational island. And sometimes, the spirit blows. The old ways aren’t working.  The neighborhood changes. The phone rings. The time seems right. Some Presbyterian congregations have found that saying ‘yes’ to selling all or a piece of their church’s property has led to a new season of ministry — a call into something new. Here’s the story of how one church in Texas decided, after 75 years, to move on.” (The Presbyterian Outlook)
  7. A’s Propose ‘Jewel Box’ Ballpark for Waterfront, Coliseum Redevelopment “The Oakland A’s are set to unveil a “bigger than baseball” mega-ballpark deal that includes a ‘jewel box’ waterfront stadium at Howard Terminal on the city’s waterfront. The plan would also turn the current Oakland-Alameda County Coliseum site into a tech and housing hub that would keep the Oracle Arena as is, while stripping the massive stadium there down to a low-rise sports park and amphitheater.” (San Francisco Chronicle)
  8. Suddenly, Luxury Stores Miss Free-Spending Chinese Tourists “There was something missing at the luxury jeweler Tiffany & Co. in recent months: Chinese tourists. For the second time in as many months, a big seller of high-end goods noticed that a particularly crucial demographic of its shopping base had made itself sparse, damaging sales and stoking fears of worse to come. On Wednesday, shares of Tiffany & Co. plunged 12 percent after reporting weaker-than-expected sales in its third quarter. CEO Alessandro Bogliolo said that Chinese tourists have failed to show up, and open wallets up, with the same vigor that they had in the past.” (The Associated Press)
  9. Investing 101: 10 Essential Tips for New Real Estate Investors “Starting out in a challenging behemoth of an industry like real estate may seem daunting at first. With so many factors and risks involved, the simple act of contemplating where to begin can be overwhelming. After all, it’s one of the largest and most regulated sectors of the U.S. economy, accounting for approximately $30 trillion. As with most things in life, however, once you get over the initial hurdle of getting started, opportunities begin to present themselves and everything becomes clearer with time.” (Forbes)
  10. These Are the Most Expensive ZIP Codes in the Country “With the end of the year comes a flurry of reports quantifying the year in real estate. Enter PropertyShark’s annual list of the country’s 100 most expensive ZIP codes, released last week, which looks at median closed sales prices across the US during 2018. It found that California just might be more unaffordable than the Empire State: The former has 82 entries in the top 100. (Silicon Valley alone has an eye-popping 30.) Meanwhile, San Francisco and New York are tied in terms of the priciest city, with nine ZIP codes apiece in the top 100.” (New York Post)
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