U.S. CRE Forecast Strong for Year Ahead
The U.S. property market landscape in 2017 will be characterized by continued strong fundamentals, increased investor flows and high transaction volume.
As for the economic landscape, the U.S. continues to grow moderately and add jobs. The U.S. employment gains continue to be strong, with unemployment dropping below 5.0 percent earlier this year, and adding to demand for housing in a variety of forms, for office space, for the retail sector and for industrial/distribution facilities. While many fear the end of the current economic cycle, the fact that the recovery was so protracted leads me to believe that we may have another two years left in the current growth cycle.
The U.S. Federal Reserve made it clear last December that the central bank sees U.S. growth as relatively stable, notching the federal funds rate higher by a quarter point. Nevertheless, underlying inflation is extremely tame in the U.S. and in major emerging markets (with worries of deflation in some sectors and countries), providing no impetus for significantly higher rates. Lending rates and fixed-income rates of return will still be very low by historical standards, inducing continued levered purchases of real estate assets.
Global economic and political uncertainties: The Brexit vote in the U.K. has added new uncertainties that will not be fully understood, much less resolved, in the near term. The IMF has downgraded global growth twice since January as uncertainties blur the outlook. For U.S. markets—real estate in particular—the impact is likely to be largely positive as U.S. assets become more attractive and valuable to global investors. We can probably expect enhanced inbound foreign investment in U.S. real estate as the U.S. becomes even more of a safe haven. The IMF predicts higher economic growth in the world as emerging markets find their footing and commodities continue their recovery. Stronger global growth is likely to provide more real estate inflows into the U.S. market as the U.S. remains one of the most attractive commercial real estate markets.
read more: NREI Online
Suburbs Will Soar on Wings of Tech
For a few years it seemed that Americans were moving to the cities, but now the trends are toward the suburbs once again. Long-turn trends favor suburbs even more.
One reason is the rise of Uber and other ride-sharing services. Uber helps users virtually everywhere, but in cities there are subways and buses and walking might be an option. Uber therefore is swinging the advantage to the suburbs, or to spread out suburb-like cities such as Los Angeles.
Self-driving vehicles are also likely to help the suburbs most. One of the worst things about the suburbs is the commute to the city or to other parts of the suburbs. But what if you could read, text or watch TV – safely — during that commuting time? What if you could tackle your day’s work just as you do on a train or plane? Commuting would seem a lot less painful. As driverless vehicles evolve to accommodate work and leisure uses of the automobile space, pleasure will replace commuting stress.
What about drones? They too would seem to favor remote areas where it is harder to access useful goods and services. Drones may do more for exurbs and rural areas than for the suburbs, but it seems cities will gain least. Walking or biking to nearby shops is a potential substitute for drone delivery. Rolling sidewalk drones might find it harder to negotiate crowded cities, and cities with a dense network of tall buildings may be less friendly to flying drones. Population density may increase the risk of a drone falling on someone.
read more: Bloomberg
Trump’s Real Estate Blues: The Biggest Reason He’s Down $800 Million This Year
Despite forays into airlines, casinos and steaks, Donald Trump’s fortune remains largely tied up in the industry that made his family rich: real estate. A new Forbes investigation into Trump’s wealth pegs his net worth at $3.7 billion, down $800 million from a year ago. Much of that drop — some $475 million — comes from a decline in the estimated value of his properties.
The presidential hopeful lost the most in New York City, home to roughly 53% of his fortune. Cooling markets for retail and office space in Manhattan helped lop about $300 million off the net value of some of his most notable buildings, including Niketown and Trump Tower (which also experienced an estimated 20% decline in net operating income). Plus a slowdown in the city’s luxury residential market hurt the value of high-end properties, such as the two dozen apartments Trump still owns in Trump Park Avenue, a former hotel he converted into condos in 2002, and his personal residence, a three-story penthouse atop Trump Tower.
Some of Trump’s holdings outside of the Big Apple fell in value as well, including his Mar-a-Lago club in Palm Beach, Fla. Forbes revised the property’s value down $50 million after other top luxury properties, including a nearly 16-acre, 33-bedroom compound down the road, struggled to sell at a higher price.
New information discovered by Forbes also played a role. For example, it turns out that many of the residential lots Trump had previously claimed to own on his Palos Verdes, Calif. golf course have either already been sold or are not yet approved for sale.
read more: Forbes
Tishman Speyer Files plans for $3.2B NYC Tower
Everything is spiraling into place for Tishman Speyer.
The developer officially filed plans Thursday for the Spiral, an office skyscraper that is slated to cost $3.2 billion. Plans filed with the New York City’s Department of Buildings call for a 2.2 million-square-foot tower, but Tishman Speyer is marketing the property at 2.85 million square feet.
The Spiral, named after its design feature of a continuous band of terraces that wrap around the building, will rise 65 stories to a height of 1,005 feet, and has an alternate address of 509 West 34th Street. It is being designed by Bjarke Ingels, the Danish architect behind the 2 World Trade Center redesign and VIA57.
In 2014, Tishman Speyer, headed by Rob Speyer, paid about $438 million for the parcels that make up the site. Later that year, it applied for a $170 million, 25-year tax break at the project.
read more: The Real Deal
Retail Defaults Loom
Sears Holdings Corp., Claire’s Stores Inc. and Nine West Holdings Inc. are among seven chains at high risk of defaulting within a year as shoppers shift to online merchants and spend more on experiences, according to a Fitch Ratings study of retail bankruptcies.
The companies were named in a 114-page report that found retailers wind up liquidated almost three times more often than other companies in bankruptcy because customer defections are making turnarounds harder to execute. Other chains at risk include True Religion Apparel Inc., 99 Cents Only Stores LLC, Nebraska Book Co. and Rue21 Inc., Fitch said.
Adam Kleinman, a spokesman for Nebraska Book, said Fitch’s report didn’t take into account a debt exchange completed on Sept. 19. The company is not at high risk of defaulting and has “ample runway to execute its business strategy,” he said. Representatives for the other companies declined to comment or didn’t immediately respond to messages.
read more: Bloomberg
AirBnb Wants to be Your Friend
Home sharing service Airbnb wants to cut a deal with owners and managers of apartment buildings. “We’ve been having a conversation with the multifamily community over the last couple of years,” says Chris Nolte, a spokesman for the website.
The company’s new “Friendly Buildings Program” offers information to people who own and manage apartment buildings. The program reveals to apartment managers what home sharing is going on in their own buildings and effectively allows them to set some limits—provided they agree to allow home sharing to continue within those limits. The program could cut down the need for landlords to police their own buildings, finding and penalizing short-term rentals. Airbnb also agrees to share some of the income from home sharing with the apartment building managers. However, joining the program could also expose apartment managers to new worries. “Our members see real and substantial enterprise risk and liability,” says Rick Haughey, vice president, industry technology initiatives, for the National Multifamily Housing Council (NMHC).
Apartment owners and managers who join Airbnb’s program will allow renters to share their homes through Airbnb. In exchange, Airbnb will share information with the landlords, including which residents are home sharing through Airbnb going forward and who the guests are.
Landlords have wanted access to this information for a long time. Airbnb agrees to share it “if and only if” apartment managers join Friendly Buildings, according to Nolte.
read more: NREI Online
Week Ahead – All About Jobs
The ‘Big Kahuna’ of U.S. government data — The Jobs Report (for September) is due Friday and this always important number takes on even more significance with the Presidential Election about one month away. A good report according to the experts would help Democrat Hillary Clinton. It’s always a key number for real estate, housing and mortgage industries and there are a great deal of data ahead of it this week for us to learn from.
Here’s the way the calendar shapes up:
Monday
Construction Spending 10:00 AM ET
Wednesday
MBA Mortgage Applications 7:00 AM ET
ADP Employment Report 8:15 AM ET
International Trade 8:30 AM ET
Gallup U.S. Job Creation Index 8:30 AM ET
Thursday
Challenger Job-Cut Report 7:30 AM ET
Jobless Claims 8:30 AM ET
Friday
Employment Situation 8:30 AM ET