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16 Must Reads for Real Estate Investors to End the Week (Aug. 25, 2023)

The AIA/Deltek Architecture Billings Index reported stable conditions for July of this year. WeWork has been assembling a team of consultants, including lawyers and real estate advisors, to avoid bankruptcy, reported Bisnow. These are among today’s must reads from around the commercial real estate industry.

  1. Why the Commercial Real Estate Landscape Is Both Bright and Dark “At one end, the office market continues to languish in the aftershock of a pandemic that dictated the tactic of physical distancing to ameliorate its spread. Yet at the other end of the spectrum, multifamily and retail have emerged as surprisingly resilient – and even flourishing – segments along the rocky landscape. In a time of interest rate volatility against a backdrop of inflation, Jamie Woodwell (pictured), head of commercial real estate research for the Mortgage Brokers Association, has his work cut out for him as he tracks investor interest in a mercurial market. Mortgage Professional America reached out to him for a snapshot of the current state of the CRE market based on his expert insights.” (Mortgage Professional America)
  2. Inside Insurance Brokers’ Efforts to Cover Commercial Property ‘In Crisis Mode’ “Skyrocketing insurance costs for commercial property have placed insurance brokers in the middle of increasingly frantic negotiations, straining to forge deals and cobble together coverage to allow projects to move forward. Higher prices have added costs to ongoing development and existing properties, straining budgets in particularly disaster-prone regions and pushing firms industrywide to re-evaluate existing policies and, in some cases, take less coverage.” (Bisnow)
  3. AIA/Deltek Architecture Billings Index Sees Stable Business Conditions in July “The American Institute of Architects (AIA)/Deltek Architecture Billings Index (ABI) results for July signals mostly stable business conditions. The ABI score was 50.0, indicating that billings at architecture firms remained flat for the month. ‘This is the third straight month that billings at architecture firms have stabilized,’ said AIA Chief Economist Kermit Baker, PhD. ‘New project work has been even stronger over this period. This suggests that design work may finally begin to increase over the coming months, although somewhat modestly.’ Firms with a commercial/industrial specialization reported their strongest billings growth in more than a year, while firms with a multifamily residential specialization continued to report declining billings.” (AIA)
  4. WeWork Assembles Team to Avoid Bankruptcy as NYSE Starts Delisting Process “Hoping to avoid public bankruptcy proceedings, coworking giant WeWork is amassing a team of restructuring experts. The company brought on real estate adviser Hilco Global and tapped consultant Alvarez & Marsal and law firm Kirkland & Ellis to help address the company's massive debts and future as a business without having to go to court, Bloomberg reports.” (Bisnow)
  5. Majority of Rent-Stabilized Apartments Don’t Stay Vacant for Long, Report Says “A new report seeks to shed some much-needed clarity on a pair of hot button issues: how many of the city's rent-stabilized apartments are empty and how long they stay that way.” (Crain’s New York Business)
  6. Real Estate Investors Surge into Electric Truck Charging “Somewhere around the middle of the Netflix movie “The Founder,” actor Michael Keaton’s Ray Kroc character is told that his franchise success turns on real estate, not flipping hamburgers. The same could be said of the nascent electric truck charging business. Every electric charging depot needs land. As part of a multiprong strategy, the biggest real estate developers and a host of well-funded startups are gobbling up acreage for future sites. The opportunity is enormous. The California Energy Commission estimates the state will need 157,000 medium- and heavy-duty truck chargers by 2030. The first target is the 30,000 drayage trucks that haul cargo to and from ports in Los Angeles, Long Beach and Oakland.” (FreightWaves)
  7. Bankrupt Trucker Yellow’s Real Estate Is in High Demand “The dismantling of bankrupt trucker Yellow is shaping up as a bidding battle over real estate as trucking companies look to capitalize on a rare chance to snap up coveted freight terminals across North America. Old Dominion Freight Line last week agreed to buy Yellow’s network of about 170 truck terminals for $1.5 billion, surpassing an earlier offer of $1.3 billion from rival trucker Estes Express Lines. Both bids exceeded the value Yellow placed on its real estate in its bankruptcy filing, signaling the high value trucking companies place on the sites.” (The Wall Street Journal)
  8. Biden Incentives for Foreign Investment Are Benefitting Factories “Lucrative new tax breaks and other incentives for advanced manufacturing that President Biden signed into law appear to be reshaping direct foreign investment in the American economy, according to a White House analysis, with a much greater share of spending on new and expanded businesses shifting toward the factory sector. Data that include the first months after the enactment of two pieces of that agenda show that a key measure of foreign investment fell slightly from 2021 to 2022, adjusted for inflation.” (The New York Times)
  9. These Real Estate Firms Lost the Most on WeWork “Cushman & Wakefield, Adam Neumann and Shaquille O’Neal are among the players facing losses after WeWork’s share collapse.” (The Real Deal)
  10. Subway Sandwich Chain Sells Itself to Private Equity Firm Roark Capital “Roark Capital is buying Subway, ending the sandwich chain’s more than five decades of family ownership and marking a new era for the struggling company. The announcement Thursday ends the chain’s lengthy sale process, which publicly kicked off in February. Subway reportedly sought $10 billion, a high price that alienated many potential suitors like restaurant conglomerates, leaving only private equity firms to duke it out in an auction. Other reported bidders included TDR Capital and Sycamore Partners.” (CNBC)
  11. Zoom CEO Says Employees Need to be in Office Because It’s Hard to Build Trust Over Zoom “In the wake of the onslaught of the covid-19, employees across the world grew chummy with a perfectly appropriate remote work schedule that allows them to work from home. However, one of the companies that carried pandemic digital infrastructure on its back, Zoom, isn’t too keen on keeping remote workers away from the office since the video calling platform is making them too friendly, according to leaked audio of CEO Eric Yuan at an all-hands meeting at the company.” (Gizmodo)
  12. Goldman Sachs Is Pressuring Workers to Return 5 Days a Week. Here’s How its Tough RTO Stance Compares with Meta, Zoom and Others. “Businesses urging workers to return say that in-person working cultivates a more open company culture and creates more opportunities for collaboration. Some research has found that, on average, people are more at least somewhat more productive when working in the office.” (Insider)
  13. The Future of Commercial Real Estate and Big City Budgets “One data and analytics group estimated that commercial property values are down 12 percent over the past 12 months, putting today’s values on par with those in May 2018. In comparison, residential home values are about 50 percent higher than in mid-2018. The divergence in commercial and residential property values makes it hard to predict the fiscal consequences for local governments broadly. Total property tax revenue accounts for 30 percent of local general revenue, but the pain from this transition will likely be concentrated in major cities with big commercial districts. For example, the decline in office values is projected to cost the District of Columbia $464 million in combined tax revenue over the next three fiscal years.” (Tax Policy Center)
  14. LA Tenants Welcomes the Rent Freeze, But Landlords Are Tired of Restrictions “L.A. is the only major city that still has a freeze — lasting until Feb. 1. — on rent-stabilized units, which make up almost three-quarters of its apartments. For many renters, the freeze has been a lifeline, allowing them to stay housed and keep up with vital expenses as inflation soared and many lost work hours and jobs. But landlords like the Felkers say they were forgotten in the debate — forced to dip into savings and let tenants fall tens of thousands of dollars behind in rent, even selling nest eggs that were supposed to fund them through retirement.” (Los Angeles Times)
  15. Replacing Struggling Mall with New Downtown Soccer Stadium Subject of New S.F. Feasibility Study “It turns out Breed's comments in June about replacing Westfield Centre with a downtown soccer stadium weren't offhand remarks.” (San Francisco Business Times)
  16. Chicago Joins Los Angeles in Backing Increased Real Estate Transfer Taxes to Combat Homelessness “Chicago’s new mayor is throwing his support behind a revised proposal to raise real estate transfer taxes on property sales of $1 million or more to raise money to combat homelessness, following a similar move by Los Angeles and other localities. Mayor Brandon Johnson’s backing for a so-called mansion tax is intended to address a housing market beset by rising prices and increasingly limited options. But the proposal is likely to face stiff opposition from real estate professionals, who argue that any new taxes are too steep a burden during a historically difficult time to sell buildings or fill them with new tenants.” (CoStar News)
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