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Seven Must Reads for the CRE Industry Today (Dec. 14, 2022)

The Street forecasts that equity REITs might see a better year in 2023. Sales of multifamily assets and development sites have been the most active of any property types in New York City recently, reports The Real Deal. These are among today’s must reads from around the commercial real estate industry.

  1. The Next Rate Hike: What’s Ahead for CRE “The consensus agrees: The Federal Reserve will again raise interest rates on Wednesday. Following four consecutive meetings that resulted in a jump of three-quarters of a percentage point, the anticipation for this event is a smaller rate hike than previously. Ultimately, the decision of how much to raise rates will reflect the latest data on the Consumer Price Index, including wage growth, consumer goods pricing, consumer demand, housing prices and shipping costs.” (Commercial Property Executive)
  2. REITs Could Be Looking Up After Desultory 2022 “Soaring interest rates and the weakening economy have crushed real estate investment trusts in 2022, with the FTSE Nareit All Equity REIT index dropping 23% year to date. Rising rates hurt REITs because they borrow money to buy properties and because higher yields make bonds, which generally are safer investments, more attractive compared with REITs.  Meanwhile, a slumping economy lessens demand for real estate.” (The Street)
  3. WeWork’s Once Robust Cash Reserves Have Dwindled, Raising Chances of Default “WeWork Inc. is trying to turn a profit before its once formidable cash reserves run out. The Federal Reserve’s efforts to fight inflation have made that harder. Recession fears and tech-industry job cuts are weighing on demand for co-working desks. Meanwhile, money-losing companies such as WeWork are squeezed by higher interest rates, which have made debt harder to come by and the promise of future profit less appealing to investors. WeWork, saddled with expensive long-term leases and more than $3 billion of debt, recorded a negative cash flow of around $4.3 billion between July 2020 and September of this year.” (The Wall Street Journal)
  4. I-Sales Recap: Multifamily, Development Sites Dominate Deals “All but one deal for commercial properties valued between $10 million and $40 million in New York City last week involved multifamily assets.” (The Real Deal)
  5. Shrinking Office Building Values Are Becoming a Dilemma for City Budgets “The sharp decline in office building values is likely to become a growing problem for the budgets of cities, schools and other jurisdictions that depend heavily on property taxes from these building owners. Most municipal budgets haven’t suffered much yet. For a variety of reasons, declines in property values typically take years before they are reflected in the real-estate assessments of most taxing jurisdictions. But municipalities might soon start feeling pain, say lawyers and appraisers throughout the country.” (The Wall Street Journal)
  6. Caesars Palace in Times Square? Don’t Bet on It “New York real estate developers say a casino in Manhattan is a long shot. Queens and the Bronx are the odds-on favorites—maybe even Coney Island.” (Forbes)
  7. Dollar General’s New Popshelf Stores Chase Inflation-Weary Shoppers in the Suburbs “Dollar General’s next big strategy for growth is tucked in a strip mall in suburban Nashville, and it is coming to other cities soon. It’s a new store called Popshelf. Over the past two years, the Tennessee-based discounter has tested the store concept, which caters to suburban shoppers with higher incomes, but sells most items for $5 or less. A wide range of merchandise fills the shelves, including holiday-themed platters, party and crafting supplies, novelty foods such as gourmet chocolates and Portobello mushroom jerky, and gifts like dangly earrings, lip gloss and toys. It’s designed to be a treasure hunt that keeps shoppers coming back.” (CNBC)
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