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12 Midweek Must Reads for Real Estate Investors (Oct. 25, 2023)

The Federal Reserve’s recent sentiment report found that three-quarters of its survey respondents were concerned about the health of commercial real estate as a near-term risk. The Wall Street Journal looks at how big data has helped landlords charge higher rents even while incurring higher vacancies.

  1. Inflation, Commercial Real Estate Among Top Financial Stability Concerns “The latest version of the central bank’s semiannual report found that three-quarters of survey respondents cited those two issues as prominent near-term risks. Concerns over bank stability following the failure of three large firms this spring were cited by roughly half, similar to levels seen in the May version of the report. Economic weakness in China had grown in the Fed’s semiannual survey, cited by 44% of those surveyed as a top risk, compared to just 12% in May. But the war between Russia and Ukraine slipped to the 11th-most cited concern by respondents, after it was cited as the top financial stability concern one year ago.” (Insurance Journal)
  2. U.S. Commercial Real Estate Debt Grew 5.9% in Q2 “A view of CRE debt is a window into activity, although with some potential caveats. With all the news of falling transaction volumes, higher interest rates and rate caps, and diminishing valuations without a massive and obvious influx of distress purchasing, one might assume that the amount of CRE debt was falling. Except, according to a recent Trepp analysis, “The universe of commercial mortgages increased by $320.5 billion year-over-year, or 5.9% from Q2 2022, to $5.8 trillion in Q2 2023, according to the Federal Reserve’s flow of funds,” or the Z.1 report, that the firm compiled.” (
  3. CMBS Third Quarter Workouts Incur Big Losses “CRED iQ took a deeper dive into a selected group of commercial mortgage-backed securities (CMBS) loans that incurred the largest realized losses in the third quarter of 2023. Our research team identified 18 notable workouts classified as dispositions, liquidations or discounted payoffs during the third quarter. All 18 workouts had realized loss severities that varied from 30 percent to 100 percent (as determined by the outstanding balances at the time of disposition).” (Commercial Observer)
  4. Commercial Real Estate Drop Still Has a Long Way to Go “Cohen & Steers is readying its funds to capitalize on distress in commercial real estate, but isn’t yet ready to take the plunge. Price declines in the sector are ‘about halfway there,’ CEO Joe Harvey said in an earnings call reported by Crain’s.” (The Real Deal)
  5. Self Storage Facing Multiple Headwinds, Including Softening Demand “Softening demand that is mirroring migration and home sales trends has led to continued negative rent growth for the self storage sector, according to Yardi Matrix’s National Self Storage Report for October 2023. Street rates fell month-over-month in September and year-over-year. That Minneapolis only fell 0.7% month over month made it a top performer.” (
  6. A Bundling of Challenges: The Healthcare Real Estate Sector Is Far from Immune to Today’s Economic and Staffing Hurdles “Medical providers are increasingly moving into traditional office spaces today. That’s not surprising, as office vacancies continue to rise. Landlords need to fill their empty spaces. They might be willing to offer lower rents as an enticement. And those lower monthly rents are just as attractive to healthcare providers as they are to any tenant. This is just one trend that Steve Brown, founder of Forte Real Estate Partners in Bloomington, Minnesota, has seen in the healthcare real estate market in which he has worked for more than 30 years. Brown says that this commercial sector is in the middle of several key changes.” (Real Estate Journals)
  7. A Global Perspective on ESG Commercial Real Estate Practices “The challenges of achieving environmental, social, and governance resilience (ESG+R) at a level accepted and capable of impacting change have become a definitive focus by retailers. The industry has taken a broader stance to shrink its impact, prioritizing sustainability and its cohort amid global concerns about protecting and preserving natural resources and the environment. The retail and real estate sectors combined account for roughly 60% of global emissions, attributed to the retail supply chain and the operational and infrastructure materials of the built environment.” (Colliers)
  8. Real Estate Needs to Start Using the Tax Credits It’s Getting “Congress is now showering the real estate industry with billions of dollars in tax incentives to encourage construction of new energy-efficient homes and offices — and to retrofit existing ones. Yet very few firms have taken advantage of these unprecedented tax breaks so far for reasons ranging from uncertainty about how they work to unfamiliarity with green building technologies to concerns about adding expense to projects.” (Commercial Observer)
  9. Construction Starts Dip “Dodge Construction Network’s latest report on construction starts showed a 6 percent decline, leading to a seasonally adjusted annual rate of $1.2 trillion. While nonresidential, residential and non-building construction starts all saw a dip for September, Dodge attributed some of the overall drop to a lower number of megaprojects breaking ground.” (Commercial Property Executive)
  10. Thanks to Big Data, Landlords Know How to Squeeze the Most Out of Renters “Algorithms and other big data have changed the way many landlords do business. In the past, landlords would often make deep cuts to rents when the market started to head south, but algorithms showed them that wasn’t always necessary. Many building owners also once believed keeping their apartment buildings as full as possible was the best way to maximize profits. Algorithmic pricing systems, by contrast, calculated that some landlords could earn more money by pushing up rents, even if that brought about higher vacancy rates.” (The Wall Street Journal)
  11. Invitation Homes Signs Up Starwood for Property Management Push “Invitation Homes Inc., the single-family rental giant, struck a deal to manage homes for another major landlord at a time when scarce inventory of properties for sale is making it hard to expand. Dallas-based Invitation Homes is taking over management of more than 8,500 homes owned by Starwood Capital Group, according to a letter viewed by Bloomberg.” (Bloomberg)
  12. Food Halls, a Hot Real Estate Investment, Conquer the Suburbs “Food halls, once a staple primarily of big cities, are rapidly multiplying in the suburbs as developers aim to capitalize on the rise of hybrid work and foodie culture. These collections of small restaurants typically have shared seating and offer a variety of gourmet and ethnically diverse cuisines. They target customers who are willing to spend $15 on an artisanal sandwich or want a meal from West Africa or one inspired by Asian open-air markets. In contrast to food courts in highway rest stops or older shopping malls, food-hall operators generally avoid national fast-food chains and waffle-chair seating. Food halls favor local restaurateurs, craft beer and modern décor.” (The Wall Street Journal)
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