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12 Must Reads for the CRE Industry Today (July 1, 2022)

The Wall Street Journal looks at why San Francisco’s apartment rents haven’t recovered as much as those in other U.S. cities. Commercial real estate investors are rethinking whether they should refinance, reports Commercial Observer. These are among today’s must reads from around the commercial real estate industry.

  1. Rents Have Bounced Back to Pre-Pandemic Levels in Most Major Cities. San Francisco Isn’t One of Them. “One reason for the sluggish recovery is that the city’s rental market was the most expensive in the country prior to Covid, and it took the biggest hit when the pandemic struck. The city’s median rent plunged 26% between March and December 2020, Mr. Salviati said. He said San Francisco’s rental market experienced a “perfect storm” when a chunk of its tech-heavy workforce left the city to work remotely. “A lot of folks were questioning why they were paying top-dollar, big-city prices,” Mr. Salviati said.” (The Wall Street Journal)
  2. House-Flipping Rate Rises, But Investors’ Profits Are Falling “Roughly one in 10 U.S. homes sold during the first quarter of 2022 was flipped, as investors responded to strong demand from buyers. But the profits on those deals fell to a 13-year low, a new report shows. The report, published by the real estate data analytics firm Attom, showed that 114,706 single-family houses and condos were flipped during the first quarter of the year, representing 9.6 percent of all transactions in that period. That’s up from 6.9 percent in the fourth quarter of 2021 and 4.9 percent in the first quarter of 2021.” (The New York Times)
  3. CMBS: Growing Demand for Floating Rate Product “A significant contributor to the CMBS market’s growth has been the single asset, single borrower (SASB) segment. Click here to know more about the developments in this market.” (Seeking Alpha)
  4. Why CRE Investors Are Rethinking Refinancing “Last month, the Federal Reserve raised its Federal funds rate 75 bps to a target range of 1.5 percent to 1.75 percent in order to control run-away inflation. Meanwhile, the 10-year Treasury yield had doubled from 1.6 percent at the beginning of the year, and the short-term Secured Overnight Financing Rate had climbed about 150 basis points from near zero. During the first quarter, investors were eager to refinance in order to take advantage of high valuations and to get in the market before the Fed started hiking its benchmark interest rate to ease inflation.” (Commercial Observer)
  5. Billionaire Jim Chanos Is Betting Big Against Data Center REITs “Brick-and-mortar, or legacy, data centers are in full focus after Jim Chanos revealed that they are his next short target. The founder of Kynikos Associates, now known as Chanos & Company, disclosed that he is raising several hundred million dollars to create a fund that will short data center real estate investment trusts (REITs). Chanos sprang into the mainstream investing world after successfully shorting Enron due to “deceptive accounting practices.” The acclaimed investor has an estimated net worth of $2 billion.” (Investor Place)
  6. Colliers International Buying Stake in Denver-Based Versus Capital “Colliers International Group Inc. said Thursday that it has agreed to buy a 75% ownership stake in alternative real asset management.” (MarketWatch)
  7. Apartment Owners Likely to Reap Rewards of Housing Market Headaches “High prices and low inventor are keeping renters in place; landlords will benefit.” (Bisnow)
  8. Marcia Fudge Says Miami Is Nation’s Housing Crisis Epicenter “Marcia Fudge, U.S. Secretary for Housing and Urban Development, declared Miami ground zero of the nation’s housing crisis.” (The Real Deal)
  9. New Plan for Philadelphia Navy Yard Calls for a $6B Investment “A development team for 109 acres at the Philadelphia Navy Yard has fine-tuned its initial plan for the site that involves $6 billion in new investment over the next two decades, the Philadelphia Business Journal reports. The build out is expected to result in 12,000 new jobs at the South Philadelphia property and continue its transformation. The plan calls for the development of an additional 8.9 million square feet of space involving lab and manufacturing space for life sciences companies along with buildings that will house 3,900 new apartments and 235,000 square feet for retailers and makers.” (NBC Philadelphia)
  10. Bally’s Signs $1B Deal to Sell, Lease Back 2 Rhode Island Casinos “Bally's sold the properties for the Bally's Twin River Lincoln Casino Resort and Bally's Tiverton Casino & Hotel to Gaming and Leisure Properties.” (Bisnow)
  11. Collaboration, Creativity and Coffee: Reasons Why the Office Still Matters “Why are so many companies across a wide variety of industries heading back to the office? Well, like we mentioned earlier, there’s a sense of connection and an ability to be creative that’s simply difficult to replicate in isolation. Many people have anecdotally felt this through things like “Zoom fatigue.” However, science now backs up those feelings. In a recent study published in Nature, researchers studied the impact of collaborating via technology like Zoom or Microsoft Teams. In the study, they looked at the creative impact of work done virtually as opposed to work done in-person.” (REBusiness Online)
  12. Zeroing In: The Tradeoff Between Carbon Offsets and Carbon Zero “Carbon neutral, carbon negative, carbon capture: these are widely cited buzzwords throughout the real estate industry, as well as among climate advocates at large. The terms are bandied about as developers, landlords and builders commit to environmental, social and corporate governance (ESG) initiatives. Beyond Lendlease, Maryland-based developer JBG Smith recently announced that it had achieved carbon neutrality via offsets, while in October brokerage giant Cushman & Wakefield pledged to meet net-zero emissions by 2050.” (Commercial Observer)
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