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11 Midweek Must Reads for Real Estate Investors (May 10, 2023)

Federal officials are keeping a watchful eye on potential signs of distress in commercial real estate, reported The New York Times. Sourcing Journal looks at U.S. markets where it’s possible to find available warehouses. These are among today’s must reads from around the commercial real estate universe.

  1. Financial Stability Experts at the Fed Turn a Wary Eye on Commercial Real Estate “The Fed’s comments on commercial real estate amounted to muted watchfulness rather than a full-throated warning — but they come at a time when many investors and economists are closely monitoring the sector. The outlook for office buildings in downtown areas, where workers have not fully returned after a shift to remote work that began during the coronavirus pandemic, has emerged as a particular concern on Wall Street.” (The New York Times)
  2. Majority of 50 Largest MSA’s Saw Uptick in CRE Distress in April “Of the 50 largest metropolitan statistical areas (MSAs) tracked by CRED iQ, the overwhelming majority exhibited month-over-month increases in the percentage of distressed commercial real estate loans in April. There were 42 markets with increases in CRE distress, equal to 84 percent of the 50 largest MSAs. The average increase in distress was approximately 80 basis points.” (Commercial Observer)
  3. Bankruptcies, Bank Failures Haven’t Dented Retail Real Estate Recovery Just Yet “Several prominent retailers have filed for bankruptcy and three of the biggest bank failures in U.S. history have taken place in the past few months, but none of that has yet blunted demand for retail space. Although consumer retail spending dropped slightly in February and March, retail landlords showed optimism discussing their first-quarter earnings, with many reporting rising rents amid high demand and guarded optimism that the sector — which had so long been the laggard among commercial real estate asset classes — will be the standout performer this year.” (Bisnow)
  4. Fannie ‘Real Estate Owned’ Inventory Essentially Unchanged in Q1 “Fannie reported results for Q1 2023. Here is some information on single-family Real Estate Owned (REOs). Foreclosure have increased slightly since the end of the foreclosure moratorium. Fannie Mae reported the number of REOs increased to 8,780 at the end of Q1 2023, essentially unchanged from 8,779 in Q4 2022, and up 18% from 7,430 at the end of Q1 2022.” (Calculated Risk)
  5. NY Landlords Ask Supreme Court to Hear Rent Control Challenge “The Rent Stabilization Association and Community Housing Improvement Program filed their case against New York rent stabilization.” (The Real Deal)
  6. Where Warehouse Vacancy Is Opening Up in the U.S. “More space is popping up for warehouses and distribution centers across the U.S.—and for apparel supply chain businesses searching for immediate real estate availability.” (Sourcing Journal)
  7. New York Smallest Businesses Face Some of its Biggest Rent Increases “Three years after the pandemic flattened the Manhattan office market and the commercial ecosystem that depended on it, small businesses in the other boroughs are facing the biggest rent increases in the city, as storefront rents in Manhattan are falling. The burden is landing mostly on store owners in predominantly Black, Latino and Asian neighborhoods, according to a new analysis of Department of Finance data.” (The New York Times)
  8. Go Check Out This Map That Shows Just How Many Office Buildings are in Downtown San Francisco “The map, compiled using data from real estate brokerage Lee & Associates, helps visualize the 18.4 million square feet of vacant offices in downtown San Francisco — a vast amount of space capable of housing 92,000 people, The Chronicle reports. That's the same amount of space as 13 Salesforce Towers, the tallest tower in the city.” (Insider)
  9. DC Mayor Muriel Bowser Wants to Expand Tax Breaks for Developers Turning Empty Downtown Offices into Much-Needed Housing “The mayor of Washington, DC, Muriel Bowser, wants to expand the capital city's stock of residences downtown to give both an economic boost to the business district and address the housing shortage. In her fiscal 2024 budget, Bowser has proposed expanding a 20-year property tax break for these office-to-residential conversions from $6.8 million in 2027 to $41 million in 2028 to help encourage developers to transform commercial buildings.” (Insider)
  10. Why Elon Musk Is Building Two Old-Fashioned Company Towns in Texas “With his plans for Snailbrook and Starbase in Texas, Elon Musk is dusting off an old concept: the company town. But the nearly 200-year history of company towns shows they rarely live up to their creators’ utopian vision.” (The Wall Street Journal)
  11. How Amazon’s Big Bet on ‘Just Walk Out’ Stumbled “Amazon’s ‘Just Walk Out’ system was supposed to be the futuristic centerpiece of its push into physical retail. But as Amazon pulls back from opening its own physical stores, the team behind the technology has struggled to control costs and pitch the system to other big retailers.” (The Information)
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