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11 Must Reads for Real Estate Investors Today (March 29, 2023)

Current troubles in the commercial real estate market should not be compared to the Great Financial Crisis, an analyst told CNBC. Fundraising dropped for non-traded REITs in February, reports The DI Wire. These are among today’s must reads from around the commercial real estate industry.

  1. Real Estate Sector Is ‘Very, Very Far from 2008,’ Analyst Says “People want to draw parallels to the past, but the current real estate market is nothing like 2008, Cedrik Lachance, director of research at real estate analysis firm Green Street, tells CNBC.” (CNBC)
  2. Rent Prices Drop for Third Straight Month, Even in Cities like Austin and Phoenix—See Where They Fell Most “The rental market has seemingly flipped: After prices surged throughout 2021 and most of 2022, they’ve declined almost as quickly for five of the last six months, a new rent report reveals. U.S. rent prices decreased by 0.25% from January to February 2023, according to the latest data from rental listings site While it’s a smaller decrease than in previous months, it brings the U.S. monthly average rent price down to $1,937 — lower than its August 2022 peak of $2,053.” (CNBC)
  3. Non-Traded REIT Redemptions Exceed 350% of Fundraising in February “Fundraising among non-traded real estate investment trusts in February 2023 sunk to just $489 million, a low not seen since August 2020, while reported monthly redemptions have exceeded $1.7 billion, an amount reflecting 351% of fundraising and about 1.6% of reported net asset value for the industry, according to the latest monthly report by Robert A. Stanger and Co. Inc. For the year-to-date period ended Feb. 28, 2023, fundraising for the industry has totaled just $5.1 billion, including $4 billion invested in Blackstone’s NAV REIT versus cumulative 2023 redemptions of $3.4 billion.” (The DI Wire)
  4. Distress in Office Markets Spreads to High-End Buildings “Defaults and vacancies are on the rise at high-end office buildings, in the latest sign that remote work and rising interest rates are spreading pain to more corners of the commercial real-estate market. For much of the pandemic, buildings in central locations that feature modern amenities fared better than their less-pricey peers. Some even were able to increase rents while older, cheaper buildings saw surging vacancy rates and plummeting values. Now, these so-called class-A properties, whose rents generally fall into a city’s top quartile, are increasingly coming under pressure.” (The Wall Street Journal)
  5. CRE CLO Interest Rate Agreements Take Spotlight “CRED iQ sourced and analyzed interest rate cap agreements for nearly 700 floating-rate loans that have been securitized in commercial real estate collateralized loan obligations (CLOs). Interest rate cap agreements included in the analysis covered more than $30 billion in aggregate notional balance. The analysis was completed in response to an environment conditioned by rising interest rates, and corresponding benchmark indexes for floating-rate CRE debt that have risen dramatically over the past year. In some ways, March marks an allegorical anniversary of this era of rising rates.” (Commercial Observer)
  6. Landlords Are Even Less Popular Than Banks in Europe “Property companies usually find themselves at the sharp end of banks’ problems. They look particularly vulnerable in Europe, given high debt levels. Real-estate shares in the MSCI Europe Index have dropped 17% on average this month, even more than the region’s bank stocks. The panic caused by the recent U.S. banking collapses and the takeover of Credit Suisse by UBS has sharpened pre-existing worries about tightening financial conditions as interest rates rise.” (The Wall Street Journal)
  7. New York’s Classic Skyscrapers Reinvent Themselves to Better Compete “For 121 years and counting, the Flatiron has been a signature of New York City: its distinctive triangular shape; its ornamentation; its spot at the convergence of Broadway and Fifth Avenue across from the southernmost end of Madison Square; its history as one of the city’s first skyscrapers; its distinction as one of legendary architect Daniel Burnham’s most important statements; its etymological inspiration for the surrounding neighborhood, the Flatiron District.” (Commercial Observer)
  8. New Bill Aims to Give Boost to San Francisco Office Conversions “The long-awaited ordinance would also allow a variety of uses on the ground floor and in space traditionally set aside for offices.” (San Francisco Business Times)
  9. Hines Launches ESG-Centered Unit to Reduce Operations Carbon “Real estate investment firm Hines is thinking green, but not as it pertains to money. The Houston-based firm has formed a new business unit geared toward ESG investing, which ensures environmental and social factors are taken into account when undertaking a project, the Houston Business Journal reported. One of the ways Hines is implementing ESG strategies is by focusing on the reduction of carbon emissions when building new developments, targeting net-zero operational carbon by 2040.” (The Real Deal)
  10. Florida Legislature Approves Affordable Housing ‘Live Local Act’ “After two years of soaring rents, the Florida legislature passed a sweeping affordable housing bill with $711 million to fund development programs, incentives for development and bans on rent controls. The House voted almost unanimously, 103 to 6, to pass the bill, called the “Live Local Act,” on Friday. The vote came after the Senate approved the legislation earlier this month. The bill will now move to Gov. Ron Desantis, who’s expected to sign it into law.” (Commercial Observer)
  11. Plan B for Fixing Penn Station Would Wrap Madison Square Garden in Glass “The proposal from a subsidiary of the Italian firm ASTM Group calls for the construction of a rectangular glass station around Madison Square Garden. The Garden would be covered in aluminum and steel, and two new light-filled train halls would replace the notoriously cramped and dark station — all of which could be completed by 2030, the firm has said. With the initial plan all but dead and developers now scrambling to fill the void, key legislators and civic leaders say the ASTM proposal is one they are now seriously considering.” (The New York Times)
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