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Industry News

“For an industry that measures its vitality by the quarter, a lot has changed for commercial real estate between Q1 and Q2 of this year. But even as the COVID-19 crisis elicits stagnation and contraction in some segments of CRE, the industrial sector is only flourishing

“Institutions and 5031’s have an appetite for acquisitions, according to one observer. The problem is debt.”

“There are clear, actionable changes property owners and facility managers can implement today to save money tomorrow, recouping some of the lost costs from COVID, according to Matt Ganser of Carbon Lighthouse.”

 “There is no doubt COVID-19 will negatively affect many sectors of the real estate market, but not all industries will be impacted in the same way. Industrial real estate, in particular, may actually benefit from the current crisis.”

 “As more buyers enter the field, the appetite for income-producing net lease assets is rising faster than ever.”

  “New York remains the most attractive city in the world for doing business, but San Francisco is on track to surpass it in the future: Global Cities Report.”

 “Real estate houses the economy, and REITs today are providing support for some of the fastest growing parts of the high-tech sector. A generation ago, most commercial real estate consisted of a building and four walls that provided space and services for tenants. Today, however, a growing share of real estate supports the high-tech sector.”

  “Fed’s decision to stall interest rate increases this year has allowed investors to secure accretive financing for net lease buys, according to NKF’s newest net lease leader.”

  “Foreign investors made $14.4 billion worth of U.S. industrial real estate acquisitions in 2018, up a whopping 152% year-over-year due to several large entity-level deals and 29% above the average volume since 2015, according to CBRE Research and Real Capital Analytics.”

 “Even though commercial real estate may be at or past the peak of this real estate cycle doesn’t mean the market will slow down anytime soon, says Ben Prater.”

 “In a new study of 63 markets around the world, CBRE finds that 47 of them experienced a year-over-year decline in logistics real estate yields in 2018.”

 “Industrial and multifamily were the top two real estate sectors where foreign investors would like to increase their exposure in 2019. Once again in 2019, foreign investors in U.S. commercial real estate indicated they would most like to increase their allocations to industrial properties, according to this year’s survey by the Association of Foreign Real Estate Professionals (AFIRE), an organization promoting cross-border real estate investment. Seventy-nine percent of 2019 survey participants said they would like to increase their exposure to U.S. industrial real estate, with multifamily investment coming in second, with 71 percent of respondents saying they would like to increase their exposure to the property type.”

  “It is still early days in the presidency of Donald Trump, but there is no question that his administration has brought sweeping change to financial markets already, with potentially “radical” changes ahead for private equity real estate funds and commercial real estate investors.”

  “Strong investor demand for U.S. net-lease assets last year led to the second-highest annual transaction volume for this product type since 2001.”

“North America continues to represent the prime destination for real estate investors globally, according to reports from Cushman & Wakefield and CBRE. Cushman & Wakefield said Wednesday that the amount of new capital available for investments this year stood at US4435 billion, while CBRE’s Global Investor Intentions Survey 2017 cites US$1.7 trillion in dry powder.”

 “Due to rapid growth, the Southeast is emerging as an economic powerhouse with a diversifying base. With two international gateway markets in Atlanta and Miami—together accounting for more than 50 percent of the region’s international commercial real estate investment—and strong growth and educated workforces in smaller cities such as Charlotte, Tampa and Nashville, the Southeast region would form the sixth largest country in the world with a growth rate that would exceed any in the top five.”

 “Life companies, banks and CMBS lenders are prepared to expand offerings for office and industrial properties, due to both sectors’ impressive growth during the past 12 quarters, according to attendees at the recent Mortgage Bankers Association (MBA) Commercial Real Estate Finance convention. As capital is ready to leap off the sidelines, lenders are also mindful of the many loan maturities expected during the next three years. However, the flood of capital is also being held in check.”

 “Citing a strengthening labor market, moderate economic growth and increasing inflation, the Federal Reserve raised the target range for the benchmark federal funds rate from 0.75 percent to 1.0 percent on Wednesday. In doing so, the Fed took the first steps toward fulfilling its long-promised three rate hikes per year.”

 “Over the past five years, the industrial sector started seeing million-sq.-ft. warehouses being built by e-commerce giants in their quest to reach more consumers. Now, numbers are emerging to quantify the e-commerce logistics boom.  Since 2010, approximately 141.2 million sq. ft. in mega-warehouses have been built across the United States, according to a recent report from commercial real estate services firm CBRE. The CBRE study also looked into the top 10 markets for mega-warehouse construction in 2017.”

“It is sometimes said that history can travel nowhere for decades and then advance decades in a matter of months. Some will view 2016 as a year when time leapt forward while others think it took a major step backward. But nobody could say it stood still.”

  “Love him or loathe him, Donald Trump is the president come January 20. That’s yuge for the affluent and their advisors when you layer in the GOP’s control of Congress. The most successful Americans would benefit handsomely under either Trump’s tax proposals or those promulgated by House Republicans in their “Better Way” tax-reform blueprint pushed last summer.”

 “The commercial real estate industry has long been a major force in local and national politics, but that relationship has reached a new height on Tuesday, when a commercial real estate developer with little track record in public service won the election to be the 45th President of the United States. Aside from the choice of his economic advisors, what will a Trump presidency mean for the industry that created him? Here are some predictions.”

  “Trump will now be in a position to appoint the top cop of Wall Street, the regulator of the securities industry and investment advisors. Given Trump’s skepticism of regulation in any mold, it’s likely to be an adventurous choice. Andrew Stoltmann, partner at Stoltmann Law in Chicago, predicts Trump, who was sued by the SEC over a decade ago in relation to his casino holdings, will appoint an advisor-friendly chair in the mold of a Harvey Pitt or Chris Cox. Look for a defender of the securities industry and of brokers than an investor advocate seeking the shackle Wall Street.”

  “The Chicago industrial market has been putting up a lot of historic number recently, but 2016 is shaping up to be the best year yet. After falling to its lowest rate in 15 years during the second quarter, the vacancy rate declined another 16 bps in the third, and now sits at just 6.75%, according to Colliers International. Furthermore, even though developers completed another 16 projects totaling 4.6 million square feet, fewer new vacancies were introduced between July and September than during any quarter in the past 15 years.”

  “Is the window for oversized returns on commercial real estate behind us? Quite likely, according to Goldman Sachs, which recently issued a report implying real estate stocks may now be too risky for investors. Real estate industry experts have mixed views, however, about whether the ship has already sailed for high returns on commercial real estate investments.”

 “How will the fulfillment centers of tomorrow differ from those in use today? Six members of NAIOP’S National Forums offer their insights on the future of e-commerce fulfillment centers, including a look at “must-have” features; the impact of incentives on location decisions; the growth of smaller, close-in facilities in addition to mega-centers; the future role of third-party logistics providers; the impacts of technology; and more.”

  “China has quickly earned the title of Biggest Foreign Investor in the U.S. Real Estate Market, with investments in the residential and commercial sectors totaling $110 billion between 2010 and 2015, according to a recent study by the Asia Society and Rosen Consulting Group. With resonant deals like China Life’s acquisition of a landmark Manhattan office building for $1.7 billion or China Investment Corp.’s $700 million deal for a 49 percent stake in Brookfield Property Partners’ One New York Plaza office tower, the Asian state’s influence on the U.S. economy is undeniable.”

  “Developers may be wise to seek out sites and locations that will attract manufacturing uses as well as those that will attract distribution operations.”

  “REITs are heading into the second half of 2016 flush with confidence that they will maintain robust property fundamentals and steady price appreciation. The sector is up 6 percent year-to-date through early June, outperforming the S&P 500 (3.6 percent) and Russell 2000 (2.3 percent), as REIT portfolios post heady performance. Occupancies of REIT properties are near all-time highs, helping to produce strong income numbers. Self-storage and apartments are leading the way in terms of income growth, but virtually all property segments are growing strong by historical standards.”

  “A very boring stock-market event later this summer will provide a surprising answer to a perennial question: Why are most fund managers failures? The event is the creation of a new sector in the stock market. The winners here are real-estate investment trusts, which will become their own category, joining technology, health care, utilities and the like. REITs, which own commercial real estate and generate healthy dividends from the rents, will be split off from financial stocks, where they have held an awkward place alongside banks and insurers since these sectors were created in 1999.”

  “Net lease investors appear to be developing a greater appetite for properties occupied by industrial tenants, according to recent reports from The Boulder Group, a net lease commercial real estate firm headquartered in Northbrook, Ill., and net lease brokerage firm Stan Johnson Co.  In its first quarter 2016 “Net Lease Market Report,” The Boulder Group reports that cap rates on transactions involving single tenant industrial assets dropped to an all-time low of 7.10 percent in the first three months of the year.”

“Norway proposed letting its sovereign wealth fund raise real estate holdings by about $17 billion, while rejecting a call to expand into infrastructure projects.  The upper limit on real estate investments for the $850 billion fund, the world’s biggest, should be raised to 7 percent from 5 percent, the Finance Ministry said on Tuesday.”

“Though it could win the Most Improved Real Estate Sector award, the U.S. industrial sector hasn’t yet hit the seventh-inning stretch in this market cycle, according to industry experts. Investors both foreign and domestic flocked to the property type in 2015, and fundamentals and speculative development improved to pre-recession levels in the fourth quarter.”

  “Continuing a trend that has been a major theme for the U.S. commercial real estate industry in 2014, the vast majority of foreign investors plan to step up their acquisition activity stateside in the year ahead, according to the Association of Foreign Investors in Real Estate’s (AFIRE) annual survey. The survey, completed in the fourth quarter, found that 90 percent of respondents planned to maintain the same level of investment in U.S. properties that they had in 2014, or increase it.”

  “A purveyor of a new net-lease investment model is nearing its goal for its first fund and is eyeing an even larger fund for launch next year. Los Angeles–based Astrum Investment Management (AIM) announced in May the acquisition of five industrial properties in three states, with its fund on track to approach $110 million by the first quarter of 2014. The wrinkle in AIM’s model is that sellers have an option to buy back their properties after five years of the 20-year lease.”

  “The maturing commercial real estate market has some institutional investors tweaking their strategies. Many investors are willing to take on more risk, while on the opposite end of the spectrum some are also pulling back on risk as prices rise.”

  “A recent college graduate wrote, asking for advice. Mentioning how thrilled he was to be accepted into Marcus & Millichap’s training program, he wanted to know which area he should specialize in: land, apartments or industrial. I told him it didn’t matter as long as he picked one and stuck with it. Yet to have his first day in real estate, this fellow had already figured out a truth that eludes many: If you don’t specialize, your specialty will be failure.”

   “The safety and well-being of employees has always been a key priority for owners and managers of real estate, and their services partners. New issues and changes in federal safety regulations, or health risks like the Ebola virus, often require our guidance. As we look ahead to 2015, when projected growth may increase the likelihood of incidents, the commercial real estate industry needs to continue its focus on promoting a culture of safety for employees and clients.”

   “The recent $8 billion sale of IndCor Properties, an industrial REIT owned by the Blackstone Group, marks one of the largest portfolio purchases since the recession, but it comes as no surprise to capital markets experts, who say smart companies loaded up on lower-priced assets and then waited for an economic comeback.”

  “If you have a class-A property for sale in a world-class city, your next offer to buy might come from an Asian insurance company, or any of a growing list of different types of foreign investors now shopping for properties in the U.S.”

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