10 Must Reads for the CRE Industry Today (September 21, 2016)

10 Must Reads for the CRE Industry Today (September 21, 2016)


  1. A surprise Fed interest-rate hike can’t be ruled out “The Federal Reserve is likely to hold interest rates steady this week in the face of disappointing economic data over the past month, economists said, although some think it is a closer call than the market expects. Talk of an interest-rate hike persists. The central bank will release a statement and new economic forecasts at 2 p.m. Wednesday followed soon after by a press conference from Fed Chairwoman Janet Yellen. Avery Shenfeld, chief economist at CIBC Capital Markets, said he does not think the Fed would hike interest rates or even make any explicit warning of a rate hike given “the recent string of soft data. We had a weak first half, then a month or two of better data and now a month of softer data. Have we put the soft data from the start of the year clearly behind us? I would have to say no,” Shenfeld concluded. Economic growth has averaged a meager 1% over the first half of the year. Hopes of a strong second half have dimmed after recent data. For instance, closely watched Institute for Supply Management readings on manufacturing and service sectors showed contraction in August.” (MarketWatch)
  2. Personal Networking is King in Real Estate Investing “I’m talking about the tried and true human interactions that build relationships that deliver opportunities. Meeting people with like goals or similar interests has always been one of the most productive business-building activities... This is my first tip in this article because it is a great “school” for the new investor. You can tap the brains of successful investors, and they may even work with you to get you to bring them deals you find. There are frequently guest speakers at meetings who provide valuable information and resources.” (Huffington Post Blog)
  3. Amazon Plans To Open Another Bookstore “Amazon plans to open a brick and mortar bookstore near Boston, marking just the latest in the e-commerce giant’s effort to build a national bookstore chain. The store will be located in a shopping center in Dedham, Mass., a Boston suburb, according to an Amazon job listing. The company already operates a bookstore in Seattle, near its headquarters, and has disclosed plans for additional stores in San Diego, Chicago, Portland, and New York City. Amazon was originally founded with the ambition of putting brick and mortar bookstores out of business. Its aggressive discounting of books online eventually helped to drive bookstore chain Borders out of business in 2011 and hurt Barnes & Noble, the largest U.S. brick and mortar bookstore chain. Earlier this year, a shopping mall CEO revealed on his company’s earnings call that Amazon planned to open hundreds of bookstores this year. The CEO then retracted his statement. But Amazon founder and CEO Jeff Bezos said recently at the company’s annual shareholder meeting that the e-commerce giant is ‘definitely’ opening more stores, although he did not reveal how many. “In these early days it’s all about learning, rather than trying to earn a lot of revenue,” Bezos said of the bookstores.” (Fortune)
  4. Small banks are the new property titans “Local and regional banks, chasing higher-yielding investments, have ramped up lending to commercial real estate developers. While they're filling the gap left by a decline in commercial mortgage-backed securities offerings—until recently the main funding source for commercial real estate—the opportunity is also risky for the smaller players. In the first half of 2016, 41 percent of real estate financing in the U.S. came from national and regional banks, up from 25 percent two years earlier, according to data released last week by real estate data firm Real Capital Analytics. Conversely, the CMBS market saw its share of commercial real estate funding decrease from 30 percent to 10 percent in that same period. The recent plunge in CMBS offerings was due to market volatility, pricing pressures, and new financial regulations that go into effect this December. The new regulations require issuers to retain a larger portion of the CMBSs that they issue -- 5 percent -- which has caused some of the traditional issuers to depart the field altogether.” (Crain’s Chicago Business)
  5. Economy Watch: U.S. CRE Deal Volume Slows in Q2 “Capital markets cooled for the second consecutive quarter in second-quarter 2016, as overall U.S. commercial real estate transaction volume dropped 12.7 percent from a year earlier, to $101.2 billion, according to Ten-X’s latest report on capital trends in commercial real estate (Ten-X was formerly Auction.com.) Even so, the report posited that several fundamental economic indicators continue to reflect a relatively strong marketplace, including American CRE as a safe investment for foreign entities. Also, confidence in the market remains relatively strong, with the second quarter of 2016 marking the eighth consecutive quarter in which deal volume topped $100 billion, noted Ten-X. Four of the five market sectors outperformed their 10-year deal volume averages by more than 20 percent, and continued investor demand in multifamily properties led the apartment sector to beat its average by a whopping 55 percent.” (MultiHousing News)
  6. Blackstone Bets Big on Logistics “Private-equity giant Blackstone Group LP has cut a deal to pay $1.5 billion for a portfolio of logistics centers, in the latest sign that this e-commerce-driven business is one of the hottest areas in the commercial-property industry. Blackstone, the world’s largest private real-estate owner, has signed a contract to buy the 12 million-square-foot portfolio of mostly West Coast property from LBA Realty LLC, an Irvine, Calif.-based investment company with properties in the western U.S., according to people familiar with the matter. Once closed, the deal will mark Blackstone’s biggest purchase of U.S. distribution centers since it exited from the U.S. logistics business in 2015 by selling IndCor Properties for $8.1 billion. Logistics properties typically include warehousing and distribution facilities for moving goods from manufacturers to stores and customers. Investor demand for such real estate has shown unusual resilience during what many analysts and investors consider to be a late stage of a bull market for commercial property. Prices keep rising even as those in other commercial-real-estate sectors, such as office buildings and malls, have shown signs of cooling.” (The Wall Street Journal)
  7. These large metros are seeing the fastest growth “The U.S. economy may be stuck in low gear, but there are plenty of cities across the country that are booming. Still, many smaller cities are getting left behind, according to the latest government data released Tuesday. The numbers show that economies of most major American metro areas have fully recovered, but many smaller cities are still struggling to shake off the lingering impact of the Great Recession. Of the 382 metro areas tracked by the Bureau of Economic Analysis, some 292 saw their local economies grow last year. Among the largest local economies, San Jose, California, showed the strongest growth at 8.9 percent, led by the continued boom in information technology in the region.” (CNBC)
  8. EB-5 program set to expire – again “New York’s developers are still dealing with the emotional pain of losing the 421a tax abatement program, and now they may have to wave good-bye to another beloved subsidy: EB-5. A key provision of the visa program, which allows foreigners to invest upwards of $500,000 in U.S. real estate projects in return for a green card, is set to expire Sept. 30. Although Congress could temporarily extend the program until after the November election, the program’s future remains in limbo. The program was last set to expire last September, but lawmakers kept it afloat with stopgap bills. EB-5 investors are a popular source of (relatively) cheap cash for New York’s developers, and have helped fund major projects like Related Companies’ Hudson Yards. Reformers headed by Iowa Sen. Chuck Grassley want to bar condo projects in high-income neighborhoods from receiving EB-5 funds, which are in theory intended to support underdeveloped areas in the suburbs or rural America. But New York Sen. Chuck Schumer heads a group opposing such changes, creating a stalemate.” (The Real Deal)
  9. Howard S. Wright Tapped to Build Portland’s Broadway Tower “Howard S. Wright, a Balfour Beatty company, has been named the contractor for BPM Real Estate Group’s Broadway Tower office and hotel project in downtown Portland. The two companies previously teamed up on another Portland project—Pearl West, a nine-story, 230,000-square-foot office building in the city’s Pearl District that was the first downtown office building constructed after the recession. That project, which was built as speculative office space, was completed earlier this year. The team’s newest project is a 19-story, 430,000-square-foot building at the southwest corner of Southwest Broadway and Southwest Columbia streets. Located in the heart of downtown Portland, Broadway Tower is within walking distance of some of city’s best restaurants, shops, and art galleries. It will feature a 180-key Radisson RED hotel, which was announced in the spring, and 175,000 square feet of office space. The building will also have more than 2,000 square feet of ground-floor retail space. The hotel will occupy the first eight floors and 11 floors of Class A office space will be built atop it. The project will include parking spaces for 247 cars and 132 bikes on four underground parking levels.” (Commercial Property Executive)
  10. Proposed Arts District development would bring 475 condos to the area “Developer Mark Janda, the man trying to gentrify a stretch of Santa Monica Boulevard in Hollywood, wants to put his next mark on the Arts District, a neighborhood that’s already filled with luxury lofts, craft breweries, and overpriced coffee. He filed plans Tuesday to build a whopping 475 live-work condos at Alameda and 7th streets, the southern portion of the neighborhood. Plans call for demolishing a cold storage warehouse and turning it into a complex that, in addition to holding housing, would have 703 parking spots and nearly 45,500 square feet of commercial space. Five percent of the units would be earmarked for tenants with very low incomes…The Arts District project site, on the other hand, would merely be joining a slew of redevelopment projects.” (Curbed Los Angeles)


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