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Nine Must Reads for the CRE Industry Today (June 17, 2022)

Randy June 16, 2022 0 Views
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  1. Rising Rates Could Cool Industrial Investment, Executives Say “Rising interest rates could pinch freight carriers and put industrial real-estate transactions on pause, executives say, but tighter policy might help if it succeeds in slowing the inflation that is driving up the cost of projects. ‘If there’s any one sector that really needs inflation to get under better control, it is the industrial sector,’ said Kevin Thorpe, chief economist at real-estate services firm Cushman & Wakefield. The Federal Reserve on Wednesday announced it would raise interest rates by 0.75 percentage point and Fed Chairman Jerome Powell said the central bank could follow the largest interest rate increase since 1994 with more rapid hikes this year.” (The Wall Street Journal)
  2. Workers Don’t Feel Quite as Powerful as They Used To “As unemployment claims tick higher and business leaders like Elon Musk try to reassert their in-office dominance, workers are showing a little less swagger and looking for more stability than they did just a few months ago. It’s a strange limbo. Working conditions are about as good as they’ve ever been for many people, and office workers’ complaints can seem petty by historical standards. (Imagine your 2019 self griping about being required to work in an office a few days a month.) Yet a loss of total remote freedom, coupled with sobering economic forecasts, can make it feel like workers’ power is slipping away. Some companies sense the change and are wresting back more control over how much they cater to employees.” (The Wall Street Journal)
  3. Biggest Rate Hike in Decades Removes Some Uncertainty Facing CRE “As recently as 10 days ago, economists had expected that the Fed would opt for a 50 bp increase before data showed more troubling signs of inflation. Fed officials emphasized in its post-meeting statement that ‘inflation remains elevated, reflecting supply-and-demand imbalances related to the pandemic, higher energy prices and broader price pressures.’ Sam Chandan, head of New York University’s Stern Center for Real Estate, said the highest Fed hike in nearly three decades was needed to combat a pace of inflation that is ‘unsustainable’ and also reflects policy makers ‘playing catch-up’ when rates were kept so low for a lengthy period.” (Commercial Observer)
  4. How the Rate Hikes Are Impacting CRE “The Federal Reserve made its boldest move yet yesterday to tamp down inflation with a 0.75 percentage-point rate increase, the largest since 1994. Commercial real estate economists and executives say the industry has already seen impacts from earlier rate hikes, including higher cost of debt capital, tighter underwriting and collapsing deals as lenders and investors grow increasingly cautious.” (Commercial Property Executive)
  5. Real Estate Companies Lay Off Workers Amid ‘Clear Signals’ of a Housing Downturn. “The real estate brokerages Compass and Redfin are laying off employees, a sign that the housing market is cooling as higher interest rates make mortgages more expensive and rising inflation squeezes incomes. Glenn Kelman, Redfin’s chief executive, announced a cut of about 8 percent of the company’s work force in an email to employees on Tuesday, citing sinking demand, which was 17 percent lower than expected last month.” (The New York Times)
  6. As PREIT Enacts Reserve Stock Split, CEO Says Ship Has Been ‘Righted’ “Despite a sinking stock price and uncertainty about the company’s future, PREIT CEO Joe Coradino says he sees a ‘bright future’ ahead as the Philadelphia mall owner enacts a 1-for-15 reverse stock split.” (Philadelphia Business Journal)
  7. Lego Is Building a $1 Billion Factory in Virginia to Capitalize on its Fast-Growing U.S. Base “Lego Group plans to build a US factory in Chesterfield County, Virginia, to better supply one of its biggest markets. The $1 billion investment will create almost 1,800 jobs, the Danish company said. Sales for the world’s largest toy maker jumped by more than a third for the 12 months to September last year, Insider reported, while operating profits more than doubled.” (Insider)
  8. 5 Years Later: Amazon’s Whole Foods Buy a Study in Hubris and Determination “Amazon is continuing its push into grocery real estate, though some say it needs to separate art and science when it comes to retail.” (Bisnow)
  9. When Baking and Real Estate Collide “CIM invested in Tartine’s café and bakery business. Coffee Manufactory planned to move into Jack London Square, a waterfront neighborhood in Oakland where CIM was pursuing redevelopment. For CIM, Coffee Manufactory was intended to be an anchor tenant—a business that could attract customers and other businesses, increasing the over-all value and cachet of the area. ‘It’s hard to grow these types of communities in the right way,’ Jordan told the San Francisco Chronicle, in 2017. CIM, he continued, ‘gets it, essentially. They see consumers want an organic and local experience.’” (The New Yorker)
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