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14 Midweek Must Reads for Real Estate Investors (Aug. 2, 2023)

Construction starts for apartment buildings with five or more units fell by 11.2% in June, a new report shows. KKR has opened its first office in Los Angeles in its drive to capitalize on real estate investment opportunities, Bloomberg reported. These are among today’s must reads from around the commercial real estate industry.

  1. Stuck in a ‘Death Spiral,’ Local Malls Plunge in Value “Crystal Mall’s parking lots used to be so crowded that parents would line up to drop off their teenagers near one of the entrances rather than search for a spot. Now, the vast stretches of cracked pavement surrounding this 1980s-era regional mall on Connecticut’s coast have more weeds than cars. Valued by an appraiser at $153 million as recently as 2012, Crystal Mall sold in June for just over $9.5 million in a foreclosure auction.” (The Wall Street Journal)
  2. Are Cap Rates Approaching a ‘Soft Plateau’? “Interest rate volatility has pushed up cap rates in the first half of 2023, according to CBRE’s latest report. CBRE concedes that market conditions are fluid, but calls the survey ‘a useful baseline [that] sheds light on how investor sentiment is changing.’ The survey was conducted in late May and early June and reflects transactions during the first half of this year, incorporating more than 3,000 cap rate estimates across more than 50 geographic markets. More than 200 CBRE capital markets and valuation professionals completed the survey.” (Commercial Property Executive)
  3. Apartment Starts Fall 11.2% YOY “Starts of buildings with five or more units fell 11.2% in June to a seasonally adjusted annualized pace of 482,000, according to the most recent starts data report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. With financing for new apartments proving challenging to obtain, permits for buildings with five or more units plummeted 33.1% to a seasonally adjusted rate of 467,000. Completions of properties with five or more units fell 2.5% to 476,000.” (Multifamily Dive)
  4. In the Office Sector, MOBs Are a Star Attraction “Medical office buildings are becoming increasingly attractive due to the challenges posed by remote and hybrid work in the office sector, the latest CommercialEdge report shows. These buildings offer a safe haven with consistent demand for health-care services, driven by an aging population and advances in medical technology. Despite the office sector’s sales volume decline, medical office buildings maintained consistent average prices between $260 and $290 per square foot from 2017 to 2022, with the first half of 2023 seeing an average of $296 per square foot, nearly $100 higher than the national average.” (Commercial Property Executive)
  5. Tore Steen Out as CEO of CrowdStreet “Tore Steen is out as the CEO of the crowdfunding platform CrowdStreet after tens of millions of dollars allegedly went missing from accounts connected to Nightingale Properties, according to a source familiar with the situation. Steen will be replaced by Jack Chandler, the former chair of BlackRock’s global real estate arm and a member of CrowdStreet’s board of advisors. Steen co-founded CrowdStreet with Darren Powderly about a decade ago and led the company to become one of real estate’s largest crowdfunding platforms.” (The Real Deal)
  6. KKR Opens LA Office in Push for Commercial Real Estate Deals “KKR & Co. is opening its first office in Los Angeles as the alternative-asset manager seeks to capitalize on opportunities in commercial real estate. The office will have room for 25 to 30 employees working across real estate, private equity, private wealth and institutional client relationship teams, Ralph Rosenberg, the firm’s global head of real estate, said in an interview.” (Bloomberg)
  7. Amazon to Double Number of Same-Day Shipping Facilities as Expedited Shipping Becomes Norm “Amazon continues to increase its speed of shipping packages to Prime members, as more than half of orders last quarter in the top 60 largest U.S. metros arrived the same or next day. That is spurring the company to double the number of same-day delivery sites “in the coming years,” Worldwide Amazon Stores CEO Doug Herrington announced Monday. Same-day delivery is already available in more than 90 U.S. metropolitan areas.” (Bisnow)
  8. Life Sciences Real Estate Predicament: Too Much New Space, Not Enough of the Right Kind “Life sciences is still in a fledgling stage in many U.S. markets, resulting in a lack of midsized spaces for startups to grow into. But many landlords who built aggressively to respond to a surge in demand in 2021 and 2022 have large vacancies to fill and many of the same financing challenges as the companies they hopes to secure as tenants. The result is falling rents while the sector grapples with the discrepancy between the types of spaces available and the types of spaces that tenants really need.” (Bisnow)
  9. How Proptech Is Trying to Pave the Way Back to Office “Office landlords and most commercial tenants want want workers to return to full-time office work as quickly as possible, but providing the technology incentives to bring them back is still a huge challenge as the fourth Labor Day since the world first heard of COVID-19 approaches. As central business districts from New York City to San Francisco struggle to achieve even 50 percent office attendance three days a week, a number of proptech companies are attempting to make the return of workers more convenient — if still not highly desirable — for the work-from-home class.” (Commercial Observer)
  10. JLL Introduces JLL GPT: The First AI Model for Commercial Real Estate “JLL, a global commercial real estate company, has announced the launch of JLL GPT, the industry’s first large language model specifically designed for the commercial real estate (CRE) sector. Developed by JLL Technologies (JLLT), the technology division of JLL, this generative artificial intelligence (AI) model will provide insights to JLL’s global workforce of over 103,000 professionals to better serve their clients. JLL GPT combines JLL’s extensive in-house data with external CRE sources, enabling the company to offer customized solutions to its clients. The model will be used within JLL’s secure computing environment to deliver faster and more intelligent insights to clients.” (Fagen Wasanni Technologies)
  11. Real Estate Giant Jones Lang LaSalle Looks to Unload Part of HQ “Jones Lang LaSalle makes money off of helping other companies lease office space. But even the brokerage giant recognizes it doesn't need as much. The Chicago-based company this month formally began marketing more than 61,000 square feet at its Aon Center headquarters for sublease, according to a flyer. The space on the 47th and 48th floors represents about 30% of JLL's workspace in the East Loop skyscraper, where its lease runs through May 2032.” (Crain’s Chicago Business)
  12. How Some in Commercial Real Estate Spend Their Summers “Top commercial real estate pros will often escape the city during the heat of summer, but the deals still press on — and in. While the Hamptons has long been a popular getaway for New York City’s CRE set, many are also opting for more faraway destinations. Whether by the ocean or in the mountains, the industry’s lenders, brokers, developers, attorneys and architects are finding creative ways to balance their busy careers and still unwind while the weather is warm.” (Commercial Observer)
  13. Cineworld Exits Bankruptcy While Still Negotiating Smaller U.S. Real Estate Portfolio “Cineworld, the world’s second largest movie theater chain by number of screens, has emerged from Chapter 11 bankruptcy in the United States with a smaller and what is expected to be a more efficient real estate portfolio that is still being negotiated with at least one of its landlords.” (CoStar News)
  14. Record Number of Apartment-Generating Conversations in Works “While remote work has been effective for many employees and employers, a growing number of companies and organizations are mandating staffs appear in person increasing numbers of days per week. This trend leaves doubt about numbers of office buildings that may be candidates for conversion. However, the trendline is encouraging. The number of apartments resulting from adaptive reuse projects should exceed 120,000 in upcoming years, RentCafe reported.” (Forbes)
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