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Nine Must Reads for the CRE Industry Today (Jan. 12, 2023)

Investors with a net worth of $30 million or greater saw real estate as an attractive investment opportunity in 2022 amid volatility in financial markets, reports Barron’s. Urban Land Institute looks at the five sustainability issues likely to face the commercial real estate industry this year. These are among today’s must reads from around the commercial real estate industry.

  1. Ultra Wealthy Saw Real Estate as an Investment Opportunity in 2022 Amid Volatile Financial Markets “Using data from its annual Attitudes Survey of more than 500 private bankers, wealth advisors, and family offices conducted in November, combined with intel from industry experts, the real estate consultancy found that four in 10 ultra-high-net-worth individuals—those with a net worth of more than US$30 million—grew their wealth during 2022, ‘despite a year of permacrisis.’” (Barron’s)
  2. Real Estate Debt Funds Face Their Day of Reckoning “As Europe’s economic mood sours, a sharp rise in interest rates is putting commercial real estate through its first big cyclical turn since 2008. The non-bank sector, which has become a vital enabler of funding at higher leverage, now faces a test of its resilience.” (Euromoney)
  3. Multifamily Borrowers Look to GSEs for Much-Needed Stability “With the outlook for this year still very much in flux, agency lending will become an even more important source of capital for multi-family property owners than ever as the liquidity and stability of the agencies are strengths in markets under duress. Fannie Mae, Freddie Mac and the Federal Housing Administration provide stable liquidity, and unlike other capital sources, are required by federal mandate to be in the market at all times.” (Multi-Housing News)
  4. Commercial Real Estate Still Lacks Diversity, But a New Equity Rating May Accelerate Inclusion “Commercial real estate is one of the oldest and largest industries in the world, with a seismic impact on the global economy.” (Propmodo)
  5. The Telework Culture Is Threatening Downtown “’Physical office occupancy in the major office markets of the U.S. fell from 95% at the end of February 2020 to 10% at the end of March 2020 and has remained depressed ever since, only gradually creeping back to 47% by November 2022,’ write three researchers in a recent paper. The authors claim that commercial office buildings “may become a stranded asset in the wake of disruptions resulting from remote work”, especially with lower-quality properties. In the short term, they calculate that the value of office buildings has declined by 44.8%, and in the long run, up to 2029, should stabilize around a 39.2% loss.” (Morningstar)
  6. It’s Been 20 Years Since This Much Boston Office Space Was Available “Landlords in the city faced an even rougher market in 2022's fourth quarter than they did earlier in the year, according to new research published this week.” (Boston Business Journal)
  7. Sustainability Outlook: Top Five Issues Affecting Real Estate in 2023 “The real estate industry’s momentum on climate action only continues to grow as the new year begins, as demonstrated by the newly released ULI Global Sustainability Outlook 2023 report. At the same time, macroeconomic uncertainties, properly pricing transition risk, the growing intensity of climate hazards, and being able to proactively address government regulations pose new and continued challenges for the real estate and land use sectors.” (Urban Land Institute)
  8. Merger in Shared Apartment Business Creates Industry Leader “One of the largest co-living companies in the U.S. is merging with a European peer to create one of the world’s largest providers of shared apartments for young professionals. New York-based Common manages more than 4,000 apartments in the U.S., while Berlin-based Habyt operates around 7,000 apartments in Europe and Asia. The combined company will be based in the German capital under the name Habyt Group. Habyt co-founder Luca Bovone will serve as chief executive, the companies said. Financial terms of the merger weren’t disclosed.” (The Wall Street Journal)
  9. Potential FTC Ban on Noncompetes Could Mean ‘Handcuffs Are Off’ for Some Brokers “A potential Federal Trade Commission rule change that would ban noncompete clauses across the board in U.S. employment contracts would have ripple effects through the business world, including touching off a wave of change in CRE, where the clauses are often deployed, especially for top earners. Noncompete clauses are pervasive in today’s commercial real estate landscape, with companies relying on them to keep top producers in their ranks and protect their client rolls and trade secrets.” (Bisnow)
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