Category: Commercial

Some Initial Takeaways on How the $2T Stimulus Helps CRE

Industry pros are continuing to unpack what’s in the massive $2 trillion stimulus package, but already some items stand out that should provide relief to the CRE sector.

After days of rancorous negotiations, the U.S. Senate unanimously approved a $2 trillion+ economic stimulus bill aimed at helping the American economy navigate an unprecedented shock. The House appeared poised to pass the legislation on Friday and President Trump has promised to sign the bill as soon as it reaches his desk.

It could not come at a more pressing time. On Thursday morning the Department of Labor reported that initial jobless claims soared to a seasonally adjusted 3.28 million in the week ended March 21.

The bill is broken into several parts, with hundreds of billions allocated towards direct cash payments to most Americans and to vastly expanding unemployment benefits to be more generous and cover more classifications of workers. That alone will be beneficial, for example, by helping apartment tenants pay their rents.

And within the bill are specific measures that will provide some benefits to the commercial real estate sector.

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Commercial Real Estate Industry Coronavirus Resource Center

A page centralizing commercial real estate association responses, guides and resources in dealing with the ongoing coronavirus outbreak.

Many of the major North American commercial real estate industries have stepped up to deliver guidance and resources to the industry on how to handle the continuing coronavirus outbreak.

Here is a centralized list with links to the resource pages and statements provided by those groups.

If you have links to additional resources to add to this page, please contact [email protected]

Alternative and Direct Investment Securities Association

Statement on its upcoming 2020 Spring Conference, “The health and safety of our members and attendees is our top priority, and we are monitoring the COVID-19 (coronavirus) situation and guidelines set by the U.S. Centers for Disease Control and Prevention and the World Health Organization. We are working closely with the Rosen Shingle Creek resort to ensure that all appropriate measures are being taken to safeguard the well-being of our attendees, including the aggressive use of disinfectant cleaning procedures throughout the hotel, including the exhibit hall and meeting rooms, and the addition of more hand sanitizing dispensers readily available to all attendees.” (March 10)

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Icahn is shorting the commercial real estate market, which he says is going to ‘blow up’

Billionaire investor Carl Icahn told CNBC he expects the U.S. commercial real estate market will crumble.

Billionaire investor Carl Icahn told CNBC on Friday he expects the U.S. commercial real estate market will crumble, much like the broader housing market collapse of 2008.

“You’re going to have this blow up, too, and nobody’s even looking at it,” Icahn said on “Halftime Report.”

Icahn said he is shorting the commercial mortgage bond market and it’s his “biggest position by far.”

Short selling is a bet against stocks or bonds, with shorts borrowing shares from an investment bank and selling them in hopes that the asset will lose value. If it does drop, shorts buy the shares back at a cheaper price and return them to the bank, turning a profit on the difference.

Icahn’s short is specific to credit default swaps, or “CDS,” which are assets that back mortgages of corporate offices and shopping malls. Icahn said the housing market bubble of 2008 has “happened all over again” due to loans made in 2012 to shopping malls and more.

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If a Bank Branch Has to Close, What Are the Most Likely Reuse Scenarios?

As banks downsize their bricks-and-mortar footprint, their vacated spaces can be turned to other uses.

Banks continue to shutdown branches across the country, but investors see creative reuse opportunities for these locations.

The typical closed branch encompasses around 8,000 to 14,000 sq. ft. of space, with some branches reaching up to 25,000 sq. ft. or 35,000 sq. ft., says Walter Bialas, vice president of research with real estate services firm JLL. This is where creative reuse of space comes into play.

“Take a 25,000 square foot outparcel, for example,” says Bialas. “With larger retailers under pressure and limited growth in that sector, you have to match a user with the space. Even many restaurants are not this large, so it becomes a challenge to lease or sell the space and maybe develop a plan to divide the space for multiple users, which is why office type users often fit the best.”

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Breaking Down CBRE’s 2020 Market Outlook

CBRE provided NREI with an exclusive sneak peek at its 2020 Real Estate Market Outlook report.

CBRE sees more growth ahead for the U.S. commercial real estate industry in 2020, although the pace of expansion could slow thanks to already strong fundamentals that will be tough to improve upon combined with some broader economic headwinds as part of its 2020 Real Estate Market Outlook. Specifically, uncertainty surrounding trade negotiations, weakness in manufacturing and the approach of the presidential election season will hang over the industry in 2020.

Still, the report predicts a “very good year” for the industry.

CBRE provided NREI an exclusive first look at the outlook report. Investment sales volumes should remain near peak levels and industry fundamentals in most sectors will remain strong as well, according to the forecast.

“Next year will bring deceleration on a few fronts, but this still is an expanding economy and a flourishing property market benefiting from a robust job market, solid consumer confidence and low interest rates,” Richard Barkham, CBRE’s global chief economist and head of Americas research, said in a statement. “We’ll see resilience across asset classes such as office, retail and multifamily as demand continues to buoy those sectors. And we see transaction volumes and capitalization rates staying relatively stable.”

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Retreat of Negative Rates Isn’t an All-Clear for Investors: Mohamed A. El-Erian

A large-scale retreat by central banks from ultra-low rates and accommodating balance sheet policies does not appear imminent.

(Bloomberg Opinion) — Negative-yielding government bonds have been a significant force for a superb year of investment returns for both stocks and bonds, and many are welcoming their recent decline as an indicator of what will support the next leg up in valuations. Yet the evidence remains mixed, suggesting a more nuanced approach to longer-term investing.

The growth and persistence of negative-yielding debt in 2019 has done more than deliver attractive price appreciation on government bonds. It has pushed investors to take on more risk, pushing up the price of assets from investment-grade and high-yield corporate bonds to emerging markets to, of course, equities. It has also encouraged companies to intensify their financial engineering, often involving debt issuance to pay for stock buybacks. And it has supported a range of mergers and acquisitions.

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Seven CRE Economists Offer Their Predictions for 2020

We asked seven economists and researchers about their 2020 predictions for the U.S. commercial real estate market.

As we get ready to greet another year, NREI asked seven industry economists and researchers about their predictions for 2020. For the most part, they expect the U.S. commercial real estate market to remain stable, bolstered by strong employment, positive consumer sentiment and low interest rates. But some experts we interviewed caution against political headwinds and a potential global slowdown.

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Investors Hit the Pause Button on CRE Debt Strategies

Private equity investors allocated a lot of capital to CRE debt plays over the past few years. That trend has been slowing of late.

Private equity real estate funds have stepped up to be a major source of financing for the commercial real estate industry—and a bigger allocation for investors. However, fund managers may face a tougher road ahead for fundraising in the near term as capital flows to the sector slow.

Debt strategies have moved from the fringe to a more established and accepted part of the commercial real estate investment universe over the past several years. That shift has generated a significant wave of capital. According to London-based research firm Preqin, global private equity real estate debt funds have raised about $165.6 billion since 2013.

“Over the last three years in particular we’ve seen a massive amount of capital allocated to debt funds,” says Todd Sammann, executive managing director and head of credit strategies at CBRE Global Investors. The vast majority of that capital is targeting double-digit returns and is almost entirely allocated to closed-end funds. “The industry has seen fundraising trail off a little bit in 2019, which is not particularly surprising given the amount of capital that was formed,” says Sammann.

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Breaking Down CBRE’s 2020 Market Outlook

CBRE provided NREI with an exclusive sneak peek at its 2020 Real Estate Market Outlook report.

CBRE sees more growth ahead for the U.S. commercial real estate industry in 2020, although the pace of expansion could slow thanks to already strong fundamentals that will be tough to improve upon combined with some broader economic headwinds as part of its 2020 Real Estate Market Outlook. Specifically, uncertainty surrounding trade negotiations, weakness in manufacturing and the approach of the presidential election season will hang over the industry in 2020.

Still, the report predicts a “very good year” for the industry.

CBRE provided NREI an exclusive first look at the outlook report. Investment sales volumes should remain near peak levels and industry fundamentals in most sectors will remain strong as well, according to the forecast.

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Commercial and multifamily originations surge in Q3

Strong market expected to continue into 2020

Commercial and multifamily originations surged in the third quarter, the latest Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations from the Mortgage Bankers Association stated.

Commercial and multifamily originations rose 24% from the third quarter of 2018 and 9% from the second quarter in the third quarter this year, the survey states.

“Low interest rates are supporting strong levels of commercial and multifamily borrowing and lending,” said Jamie Woodwell, MBA vice president for commercial real estate research. “Through the third quarter, every major capital source is lending at a pace above last year’s level. Loans backed by multifamily and industrial properties, and made for life companies and Fannie Mae and Freddie Mac, are all running at a record pace.”

And what’s more, this pace is expected to continue even into 2020.

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