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10 Must Reads for the CRE Industry Today (October 10, 2016)

10 Must Reads for the CRE Industry Today (October 10, 2016)


  1. Not Sure Where to Find Decent Yields? Try Real Estate “Real estate funds have built towering annual returns of 14% over the past three years, so odds are good that the next three won’t be as strong. But if you’re an income-focused investor frustrated by low interest rates, real estate funds can still deliver decent dividends. Most real estate funds invest primarily in real estate investment trusts, which buy, manage, and sell commercial properties such as office buildings, shopping malls, and apartments. By law, REITs must pass nearly all their taxable income to shareholders. So despite the run-up in prices lately, REITs still pay juicy yields—3.5%, vs. 2% for the S&P 500 index of blue-chip stocks. True, REIT income doesn’t qualify for the beneficial tax rate (typically 15%) on qualified stock dividends. But REITs offer double the 1.6% yield on 10-year Treasury notes.” (Money Magazine)
  2. How The Jobs Report And A Year-End Interest Rate Hike Could Affect Commercial Real Estate “The jobs data released Friday showed negligible change, but the employment report ‒ the last before the Federal Reserve’s next policy meeting, in November ‒ has fueled speculation about a Fed rate hike by the end of the year. Before we get to the rate hike, let’s take a quick look at the jobs data and its implications for commercial real estate. The unemployment rate was “little changed” in September, the Bureau of Labor Statistics said Friday, edging up a tenth of a percentage point over August, to 5.0%. Nonfarm payroll employment increased by 156,000 in September, with average nonfarm job growth in 2016 remaining 51,000 below the monthly average last year. Nonfarm wages increased 6 cents last month, while average hourly earnings rose 2.6% over the past 12 months. Dow Jones, Nasdaq and the S&P closed lower Friday on the mediocre jobs news, pulling down the three major U.S. stock indexes for the week and ending a three-week winning streak. There were some bright spots, however. Despite the bad news from the retail sector over the past few months ‒ store closures, bankruptcies, poor earnings ‒ employment continued to trend up last month in retail trade (especially clothing and clothing accessories stores) and food and beverage services, for a total of 617,000 more jobs in both industries over the year. Employment in construction and financial activities remained relatively stable over the month.” (Forbes)
  3. Real estate investors on U.S. coasts target cheap, out-of-state markets “Even with a good salary as a data scientist at a San Francisco technology firm, Yang Guo, 30, knew he couldn't afford a home in the Bay Area, among the priciest U.S. markets. He still wanted to own property in addition to stocks, however, and soon found a way to buy cheap rental houses in faraway cities - and to outsource the associated hassles to HomeUnion, a three-year-old startup in Irvine, California. The firm is among a small crop of new companies, including competitors Investability and Roofstock, that offer ways to buy, renovate and manage properties in markets that command relatively strong rents compared to their low home prices.” (Reuters)
  4. Why construction hiring has sputtered even though firms need workers “The good news: employers hired 23,000 construction workers in September, the most in six months. The bad news: even with a strong September, construction hiring is averaging 8,000 per month, down from an average of 25,000 per month in 2015 and 30,000 in 2014. The even worse news: 23,000 workers hired is a drop in the bucket compared to the 2 million construction jobs lost after the housing bubble burst. What’s more, it’s puzzling given that some industry groups continue to flag labor shortages as one of their biggest challenges. Better pay and working conditions would go a long way toward solving that problem, many economists say. But as the Associated General Contractors of America pointed out in a workforce development plan developed late last year, the labor shortages ‘are the consequence of a series of policy, education, demographic and economic factors that have decimated the once robust education pipeline for training new construction workers.’ In other words, it may take more than just better wages to address the shortfall.” (MarketWatch)
  5. Central Development Plans 55-Acre Colorado Business Park “Central Development, a Colorado-based, family-owned development company, will acquire the former Centennial East Corporate Center in Centennial, Colo., and turn it into a new, 55-acre office and industrial project, NGKF announced recently. The developer has acquired the 25-acre Phase I of the Center for $4.5 million from Jordan-Arapahoe LLC. Kittie Hook and Wade Fletcher of NGKF represented the seller and assisted the buyer in the transaction. The team will also be in charge of marketing, sales and leasing efforts for the new development, which will be dubbed Encompass Business Park. ‘Encompass Business Park, with its easy access, proximity to business, amenities and a large and educated labor pool, offers one of the best values in the eastern Centennial area,’ Kittie Hook, managing director at NGKF, said in a statement. ‘Flexible zoning and sits shovel-ready nature for buildings of all sizes provide a speed-to-market option for select tenants.’” (Commercial Property Executive)
  6. Walmart to slow new store growth, invest in remodels and online “Walmart gave a lackluster profit outlook for next year, and said it will slow new store openings as it invests in remodels and digital initiatives. The chain on Thursday outlined its plans for the next several years ahead of a meeting with investors. In a big change for a company whose growth has been fueled by aggressive store expansion, Walmart going forward said it will rely more on comp sales and e-commerce growth to drive the top line. Although the retailer is pulling back on new store growth, it plans to increase investments in e-commerce, technology, store remodels and other customer initiatives. Walmart will open 130 stores in the United States this year, down from its original projection of 135 to 155. And next year, it will open only about 55 U.S. stores, including 35 supercenters and 20 of its newer, small-format Neighborhood Market locations. By contrast, Walmart opened 60 supercenters and 70 smaller-format stores this year.” (Chain Store Age)
  7. Move Over, Rats. New York Is Planning an Underground Park “Verdant oases have been squeezed into every corner of New York City, tucked between towering skyscrapers, carved from former military posts and abandoned railroad tracks, and even laid on top of landfills. But it is still not enough. So now the latest frontier in the quest to carve out more parkland is the city’s subterranean level — home to subways, sewage lines and rats. Plans are underway to build what its supporters say would be the world’s first underground park. An abandoned trolley terminal near the Williamsburg Bridge on the Lower East Side of Manhattan would be transformed into a green space built by a nonprofit group that has spent years experimenting with solar technology. The group proposes to illuminate the underground space with sunlight collected by high-tech panels above ground and reflected down through a series of pipes.” (The New York Times)
  8. AT&T goes big in San Francisco, puts modern spin on historic building “AT&T is pulling out all the stops in San Francisco, opening its largest, most elaborate and most tech-centered store to date. The new, two-level 24,000-sq.-ft. flagship is housed in an historic building located next to the busy and popular cable car turnaround on Powell Street. Constructed in 1908, the building has been restored from floor to ceiling back to its original Baroque architectural design. The store gives a modern twist to the building, which has National Historic Landmark status.  In a nod to the Bay Area's multicultural history and international visitors, visitors are greeted by an 8-ft. marble globe that has the word "hello" written in 32 different languages. A custom 48-ft. x 5-ft. curved digital display is on bulkhead that overlooks the second level balcony. This electronic canvas features custom fluid art created specifically for this store by artist Joshua Davis. The first floor showcases AT&T’s range of products and services, along with accessories.” (Chain Store Age)
  9. Barings Closes $93M Acquisition of Acre Capital HoldingsBarings Real Estate Advisers, one of the world’s largest real estate-focused investment managers, has completed its acquisition of ACRE Capital Holdings LLC, the parent company of ACRE Capital LLC, the agency lending subsidiary of Ares Commercial Real Estate Corp. The ACRE Capital platform will be renamed as Barings Multifamily Capital and will be a subsidiary of Barings Real Estate Advisers, formerly known as Cornerstone Real Estate Advisers. The transaction, valued at $93 million, was previously announced on June 29…Barings Multifamily Capital originates and services multifamily, senior housing and health care facility loans by utilizing GSE and other government agency programs. The platform, which complements the Barings Real Estate Advisers other origination and investment organizations, is one of only 19 lenders that hold licenses with Fannie Mae, Freddie Mac and the Federal Housing Administration.” (MultiHousing News)
  10. Developers are still planning rentals after 421a, just not as many: housing group “The Association for Neighborhood and Housing Development, a group representing nonprofit developers who focus on below-market-rate housing, released an analysis claiming that rental development is still trickling in without the contentious tax abatement, Politico reported. ‘The suspension of the 421a exemption was expected to have a major and immediate impact on the real estate market, with the big real estate lobby predicting dire consequences,’ the organization wrote in an email blast Friday. ‘In the past few months, we have been learning some new facts about what is happening in some new construction markets and the impact may not be what we were told it was going to be.’ The group pointed to plans filed for small developments, such as a 12-unit building at 978 Kent Avenue in Bedford-Stuyvesant and a seven-story building at 235 West Kingsbridge Road in the Bronx that’s expected to hold 40 apartments, as proof that developers do plan to build rental projects, albeit at a much lower rate than before.” (The Real Deal)
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