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Eight Must Reads for CRE Investors Today (Jan. 20, 2023)

Morningstar looks at the pros and cons of investing in REITs vs. directly into properties. Bisnow examines who has been buying old office buildings over the past year. These are among today’s must reads from around the commercial real estate industry.

  1. Investing in REITs vs. Direct Real Estate “Potential owners are understandably left uneasy as mortgage rates are sharply higher and home prices have slowly declined after a decadelong advance. However, over the long run, we’ve shown that real estate returns tend to fare well. Ideally, your investment portfolio should allocate between 5% and 20% to real estate, but the best avenue for reaching that exposure depends on your situation. Below, we showcase a continuum of real estate investments by the degree of personal involvement and responsibilities. And here, we break down the benefits and drawbacks of each.” (Morningstar)
  2. Blackstone CEO Schwarzman Defends Real Estate Fund “Blackstone chief executive Stephen Schwarzman says exposure to warehouses and apartments buoyed its mega real estate fund in a punishing environment where some rivals lost up to a quarter of their value. In a Wednesday interview with Barron’s editor-in-chief David Cho at the World Economic Forum in Davos, Schwarzman said the Blackstone Real Estate Income Trust, known as BREIT, weathered an environment of higher interest rates by avoiding areas of “real stress” in the real estate market such as offices and shopping malls.” (Private Equity News)
  3. Prologis Says Warehouse Demand Remains Strong in Slowing Economy “Prologis Inc., the world’s largest developer of logistics properties, is bullish about warehouse demand this year despite signs of an economic slowdown. ‘The bottom line is that conditions remain healthy, and there is little we see across our results or proprietary metrics that point to a meaningful slowdown,’ Tim Arndt, Prologis’s chief financial officer, said on an earnings call Wednesday. San Francisco-based Prologis said in October that it was pulling back on building new warehouses without tenants already signed on as it braced for a potential economic downturn.” (The Wall Street Journal)
  4. Who’s Buying Old Offices? Bargain Hunters Who Have Been ‘Waiting for This Day’ “Office buildings are at the bottom of the list of real estate assets most investors want to buy. But as prices fall, there is a brave minority of buyers putting millions behind the belief that office demand will one day return on a large scale. Simpson is one of these contrarian investors. He paid $109M in September for the Towers at Wildwood Plaza, a two-building, 1.7M SF complex in Cobb County that was developed in 2000 and is 43% vacant.” (Bisnow)
  5. ‘Built-to-Rent’ Single-Family Housing Forecast: Easing in 2023 and Booming in 2024/2025 “In our research as of early 2023, we are seeing a sharp slowdown of rent growth, going negative in some places, but we see this as being limited to the current year (2023), after which rent growth will be decidedly positive. It only stands to reason that rent growth had to slow down from the 15%-18% annual growth rates of the last couple of years. There is some confusion as to how much of a rent slowdown has already occurred.” (Forbes)
  6. Manhattan’s 10 Most Valuable Office Leases of 2022 “Last year was one of reckoning for Manhattan’s office market. After an underwhelming post-Labor Day return to the office, workspace occupancy remained below where many of the city’s landlords would like it to be. Leasing activity ground to a halt at the end of the year, with fourth-quarter figures down 43 percent from a year earlier. Still, there were bright spots, particularly for owners of new construction projects.” (The Real Deal)
  7. Why Harlem Is Getting a Truck Depot Instead of Housing “The lot on West 145th Street in Manhattan was envisioned as a $700 million high-rise complex, with a civil rights museum and hundreds of below-market-rate apartments. But after a local councilwoman protested, arguing that the project would bring more gentrification, the developer, Bruce Teitelbaum, gave an ultimatum: Unless his proposal was reconsidered, he would build a loud and unsightly truck depot. On Wednesday, the trucks began to roll in.” (The New York Times)
  8. 39 More Regal Theaters Are Closing in the U.S. Amid Bankruptcy. See the Full List. “Thirty-nine Regal theaters in the US are set to close — on top of a dozen that have already been shuttered — after parent company Cineworld announced it was filing for Chapter 11 bankruptcy in September. Cineworld detailed the plan to reject the leases starting February 15 in a new bankruptcy filing on Tuesday. Regal is the second-largest cinema chain in the US, behind AMC, with over 500 theaters.” (Insider)
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