Josh Katz

WASHINGTON, D.C. - Greater Washington’s economic outlook at standstill with ‘frozen’ commercial real estate The economic outlook for Greater Washington continues to show a region locked in stasis by a chilled commercial real estate market. At the same time, a handful of data points offer a glimpse of hope for the near future. That’s the latest finding from CBRE’s REVIVE Regional Vibrancy Index charting the D.C. area's economic strengths and weaknesses in the wake of a pandemic that changed the core of how the region operates, from the shift to hybrid work to the evolution in how people get around. CBRE and the Washington Business Journal are partnering to produce the monthly index, tracking changes throughout 2024. The index in May fell 1.3% from the previous month to 65.5 out of 100. The data lags by about a month. The most recent index, however, sits 12.2% below where it was a year ago in May 2023. Like in April, the score continues to be weighed down by a growing intensity of distress in the region’s commercial real estate markets, which face higher interest rates and softer demand. Valuations of commercial space, especially downtown offices, have also fallen dramatically, leading to fewer transactions. Office foreclosures in the first half of 2024 have already exceeded the total number recorded in 2023, CBRE reported, fueled primarily by rising vacancy and upcoming debt maturities. “Right now the region’s commercial real estate sphere just remains generally frozen and challenged,” said ​​Ian Anderson, CBRE’s senior director of research and analysis. The commercial real estate component of the score is at the lowest number the firm has ever recorded, and it is likely to remain stagnant. A lack of commercial real estate transactions is also constraining the budgets of local governments, including suburban jurisdictions, by depriving them of tax revenue. That could hold up some initiatives that governments may have otherwise pursued had the tax dollars been available, Anderson said. “That’s a hard thing for people to get a handle on, but it’s going to be something we’re just going to have to deal with over the next couple of years,” he said. The good news? The real estate industry has likely absorbed what Anderson believes to be the brunt of higher interest rates and their effects on values, especially in retail, industrial and multifamily. In the fall, he said, there’s potential for investors to move back toward new commercial real estate investments as they settle deeper into this new normal. But the caveat is that some forthcoming sales activity will not necessarily reflect positive data points. Transactions, for example, could come from multifamily owners unable to sustain higher interest rates. For more, click on the link below. #escrowcredirt #newmarktitleservices https://lnkd.in/eaztc54N

1

Leasing activity in the Atlanta #office market is on track to surpass 2023’s volumes, with H1 2024’s totals being 11% higher than the first half of last year. Get more insights in JLL’s Q2 2024 Atlanta Office Insight report: https://lnkd.in/gqD7BBfu

8

This is interesting development. Say half of these projects move forward to actual conversions and that each building has an average RBA of 200,000 that's 9.4 million square feet of office inventory removed from the supply / demand matrix. Now say that the occupancy of these buildings is 50% and they move elsewhere that absorbs 4.7 million square feet. So this would move the needle to the tune of 14.1 million square feet. It sounds like a lot of inventory being removed from the supply / demand matrix, but there is currently 97 million square feet available. So these conversions would lead to 14.5% less space available. The $64,000 question is, how do we reduce the available space by another 20-30 million square feet. The long and short answer IMHO is economic growth in NYC; which will lead to more businesses being formed and more demand for office space. Let me know if your firm needs help navigating their next office real estate transaction. Michael Adler 212-519-2046 #cre #commercial #commercialoffice #commercialrealestate #commercialofficebuilding #commercialdevelopment #commercialleasing #office #officebuilding #offices #officebuildings #officelease #officeleasing #tenant

10

3 Comments

While we wait for their finally ruling this fall…. hopefully, Prince George's County will reconsider its stance. Since the roll out of rent control in 2023, there has been a significant decline in multifamily transaction volume. In the past 1.5 years, only 5 unique transactions have occurred, totaling $105 million in cumulative sales.  This is a stark contrast to the 10-year trailing annual average of just under $960 million. From a 10-year average of 1 billion a year to 100 million in the previous year and a half is staggering. The impact of restricting free capital in the county is evident. Moreover, the county is experiencing a lack of new construction starts, further exacerbating the affordability problem. Prince George's County has vast tracts of land that could/should be developed. Instead of imposing restrictions, let's incentivize private investment to spur new construction and address the housing challenges effectively. Applying temporary fixes is not the solution. #PGCounty #DMV #RealEstate #CRE #Investment #Development #Greysteel

40

2 Comments

As we consider the current administration’s proposal to implement a rent control mechanism, capping rents at 5% for owners of 50 or more units, it is crucial not to lose sight of the many other challenges contributing to the growing affordability crisis. There has been no shortage of criticism on this plan on LinkedIn, grounded in years of well-founded research and opinions from numerous housing experts across the nation. Almost unanimously, the consensus is that imposing national rent control will exacerbate existing housing shortages—now averaging 1.5 million units nationwide—and increase, rather than decrease, affordability. I encourage you to read the attached article from the National Association of Home Builders (NAHB), which offers a ten-point guide as a blueprint towards equitable housing. Pay special attention to points #1, #5, #6, and #8. While every point on the NAHB’s guide is significant, those I highlight have been responsible for adding over 40% to multifamily development and over 20% to single-family development in regulatory costs alone. In Puerto Rico, these costs are even higher, further complicated by grossly inequitable fair market rents that are unsustainable at any level. Rent cap legislation was also introduced fairly recently, ignoring the massive disfunction in permitting, land-use restrictions, approvals and archaic zoning statutes, amongst others. This isn’t rocket science; it’s a matter of supply and demand. With high demand and limited inventory, we all know who ends up paying. #NAHB #ACPR #affordablehousing #realestatedevelopment #multifamily #singlefamily #puertorico #realestate #housingcrisis #apartments #homebuilding #housing #housingpolicy

4

3 Comments

Savannah was the country’s top industrial growth (net absorption/existing inventory) market in 2023. Tenants have been capitalizing on Savannah’s logistical advantages and first-generation space, resulting in 13.5 million sq. ft. of net absorption last year. The market has started 2024 strong, with 2.8 million sq. ft. of net absorption

31

1 Comment

RealPage Senior Director of Research and Analysis Carl Whitaker emphasized the significance of April's positive occupancy increase, noting that it reflects a continuation of the strengthening apartment demand witnessed in the highest-ever first quarter tally. The first quarter saw absorption of more than 100,000 units on net, underscoring the resilience and sustained momentum in the apartment market. 📈🏢 #ApartmentDemand #RealEstateMarket #OccupancyRates #MarketAnalysis

5

It’s official: S.F.’s Stonestown to become west side’s largest residential development in 50 years By J.K. Dineen, Reporter July 16, 2024 The long-simmering plan to convert the Stonestown Galleria from a suburban shopping center to an urban neighborhood with thousands of units of housing, playgrounds and a pedestrian-friendly main drag received its final approvals at the Board of Supervisors Tuesday, setting the stage for the largest residential development on San Francisco’s west side in more than half a century. In an unanimous vote, the Board of Supervisors approved a development agreement introduced by Mayor London Breed and Supervisor Myrna Melgar, who represents the neighborhood.  The plan calls for 30 acres of surface parking lots to be developed. There will be 3,500 new residential units in buildings ranging from four-story townhomes to 18-story towers, including a 200-unit “senior village.” It will include six acres of parks, a town square and a plaza to host the neighborhood’s farmers market. About 20% of the housing will be below market rate. A new 20th Avenue will cut through the center of the property, with about 150,000 square feet of shops, restaurants and entertainment. Parking will be moved underground as well as into parking structures. At the supervisors meeting Melgar called the project a “very large down payment into the housing we are required to build on the westside of town,” referring to the 82,000 units San Francisco is supposed to permit before 2031 under state-mandated housing plan. Melgar stressed that the mall is already a neighborhood gathering place — “spilling over with families, kids, teens and seniors on afternoons” — and that “this is an ideal place to build, on top of parking lots, in an existing commercial hub.” She made the only comments at the hearing about the project. The first stage of the project will require significant upfront investment in project infrastructure: hundreds of millions of dollars for new streets, sidewalks, utilities and parks. That will be paid for through an Enhanced Infrastructure Financing District, known as an EIFD, which will allow a portion of the net new property tax revenue generated by the new development to be reinvested into the infrastructure needed to enable the project.  As part of the vote Tuesday the board initiated the EIFD process. The development agreement includes commitments for an onsite childcare center, $1 million contribution for improvements to the adjacent Rolph Nicol Jr. Playground and $50 million to SFMTA for transportation improvements. https://lnkd.in/gEisBMxe

1

The amount of available shopping center space has declined steadily over the past decade and is now near historic lows. Demand for retail space has been broad-based, with availability declining across box sizes and regions. At the same time, dozens of large national retailers are pursuing significant store expansions as they brace Wall Street to expect thousands of planned future store openings. #commercialrealestate #retailrealestate #expansion

2

🚨 New Listing | Store Space | Fall River, MA 🚨 💲 $19,330,000 💲 🏦 136,710 SF | 1,177 Units 🏦 🖥 Offering Website: https://lnkd.in/ecRBd_xE 🖥 🔹 Unrivaled Location - Store Space has a commanding presence at the signalized off-ramp of I-195 (84,141 AADT) along Plymouth Ave (27,495 AADT)  🔹 Priced Below Replacement Cost - The $19,330,000 asking price equates to just $141.39 psf and is a Stabilized 7.5% cap rate 🔹 Exceptional Leasing Trends - This facility quickly eclipsed 30% physical occupancy within the first 5 months of operation 🔹 Low Saturation - The 5-mile saturation is just 4.42 SF per capita, with just 2.76 SF of that being climate-controlled square feet. 🔹 Class "A" Amenities - This property was completely renovated in 2023 and features a professional on-site leasing office, multiple loading areas, 27 video surveillance cameras, coded access control system, multiple elevators, and motion-activated LED lighting throughout the facility. 🔹 Diversified Revenue Streams - This opportunity has multiple revenue streams beyond self storage rent, including a long-term billboard lease, 9,400 sf retail tenant, and 16,000 sf yard lease.   🔹 Strength of Demographics - The 5-mile population is 133,641 individuals with an Average Household Income of $80,684.  Additionally, 75% of the 19,374 housing units within one mile are renter-occupied. #storage #selfstorage #colliers

40

Avison Young knows that good decisions start with good data and analytics. That's why we have compiled our Q1 2024 market analysis. With key trends, recent leasing activity, market intelligence, historical data and more, we're working to empower you to make smart decisions. https://lnkd.in/gWq4qtgW #cre #AYdifference #bigdata

7

Logistics Highlights from today, #industrialrealestate impacted.   Per the #WSJ The peak shipping season is getting underway with another threat of labor disruption at American #ports. The #union representing about 45,000 workers at ports from Maine to Texas and the seaport employers are in a standoff with no negotiations on the calendar and the current longshore contract due to expire in a little over two months. Automation is at the heart of the current impasse. But the union is also looking for a hefty wage increase, one that would exceed the 32% raise over six years won by West Coast #dockworkers last year. Per the #JOC Third-party logistics providers, less-than-truckload companies, truckload carriers and intermodal service providers are all rushing to the #Mexican border, where they hope to benefit from the increase in manufactured goods heading to the US. #Nearshoring is real, they claim, and it will be even more so within a few years, as businesses sourcing patterns reset. Although Asia remains a #manufacturing juggernaut, the likelihood of further US #protectionist action — whether by Republicans or Democrats — means supply chain managers are likely to continue to shift their sourcing strategies, to the extent they can. And that will affect #freight flows within North America.  

8

The retail sector emerges as the top-performing asset class, with multi-tenant retail absorption showing promising growth in major markets nationwide. Despite broader economic challenges, including higher interest rates and fluctuating demand in other sectors like multifamily and industrial, the retail market remains a beacon of stability. This article's insights shed light on the industry's current state and future prospects, emphasizing the importance of monitoring key economic indicators for sustained growth. Read the full article for a comprehensive view of the commercial real estate landscape and emerging opportunities. Bio: https://lnkd.in/eB3g9bP3 Google Business Profile: https://lnkd.in/egn5jSck LinkedIn: https://shorturl.at/bmDMV Facebook: https://lnkd.in/eGTqGWuN Instagram: https://lnkd.in/eZMXQpjn TikTok: https://lnkd.in/ejfsyqfM #commercialrealestate #commercialproperty #CommercialLand #commerciallandforsale #warehousespace #officespace #flexspace #industrialspace #sandiegocommercialrealestate #sandiegorealestate #realestate #cre #realtor #realestateagent #realestateinvesting #property #commercial #commercialproperty #realestateinvestor #business #investment #propertymanagement #investmentproperty #residentialrealestate #forsale #retail #entrepreneur #construction #officespace #realestatebroker #EconomicInsights #InflationAnalysis #FedPolicy

5

1 Comment

The longer the post-pandemic turmoil in office demand continues, the more clues emerge about what separates the wheat from the chaff for this property type. The relative cost of living in an office building’s metropolitan area appears to be a factor.

2

At the end of March 2024, we reached an unprecedented milestone with 195.1 million square feet of available sublease space, the highest on record. This represents 0.9% of the total U.S. inventory and 0.6% in sublease vacancy. The trend continued through 2023, particularly impacting large facilities of 300,000 square feet and above. In the first quarter of 2024 alone, there were 127 subleases available in this size category, a notable increase from 107 at the end of 2023. Interestingly, nearly half (49.6%) of these sublessors are general retailer or wholesaler companies. This surge in sublease availability presents both challenges and opportunities in the industrial real estate sector. What are you currently seeing in your markets? 📞 (407) 766-1392 #commercialrealestate #industrialrealestate #cbre #industrialwarehouse #industrialproperty #orlando #florida #industrialbroker #brokerlife #orlando #cretrends #RealEstateTrends #FloridaLeasing #CRE #foryou #explore #realestate #CRE #realestate #supplychain #warehouse #industrial

14

Well, that certainly will give syndicators fodder to proclaim: KKR buys stabilized properties with negative leverage, so can we! The major difference is that KKR is in a completely different league and has the financial strength to buy diversified portfolios with low leverage and and has access to additional capital if ever needed. That allows them to make these bets. Most syndicators that buy properties with the maximum leverage available and do not have the ability to easily tap into additional funds if things go wrong. And their offerings are single asset and not large portfolios. In a recent post, a syndicator posted that they underwrite to a lower exit cap rate than current market cap rates because they believe that's where the market is headed. They might be right and if so will come out as winners but it is still a market bet. If the bet goes wrong, they will likely not have access to additional capital to rescue such deals. In contrast, KKR with their low leverage strategy and virtually unlimited access to capital can take those bets. There is nothing wrong with buying distressed and high value-add properties with negative leverage but that is very different from purchasing a fully stabilized asset with negative leverage and hoping that the market (higher rents, lower interest rates, lower cap rates) will make the deal work at the exit. Leave those bets to KKR et al with massive portfolios/diversification and financial strength.

20

7 Comments

Global Occupancy Planning Benchmarking Report 2024 View global and regional occupancy data, and see how your organization compares #JLLReports #HybridWorkplaces #WorkplaceDesign

13

Appraisers in the U.S. need better tools that allow them to use more judgement in valuing assets. My colleague Willem Vlaming has been developing work showing that in parts of the world with low market liquidity and few comparable sales, that appraisal teams have been better able to capture the decline in asset values. http://ms.spr.ly/6040Yw5ts MSCI Real Assets #CRE

61