The retail apocalypse is entering its ninth year.
Many North American retailers were wiped out in the “retail apocalypse” which started in 2010. Amazon (NASDAQ:AMZN) and Walmart’s (NYSE:WMT) growth, the rise of fast fashion retailers, reserved spending habits after the Great Recession, and dying malls crushed countless retailers.
Some retailers survived the downturn by closing stores and expanding their e-commerce presence, but others weren’t as lucky. Let’s examine eleven retailers which could struggle to remain relevant this year.
The only thing more dangerous for America’s malls than a string of apparel-chain bankruptcies is when the trouble hits department stores.
Retailers like J.C. Penney Co. and Macy’s Inc. are considered “anchors” that keep malls humming and foot traffic flowing. They’re so important to the ecosystem that smaller tenants may refuse to set up shop without a promise that the anchors will stick around: Many leases include so-called co-tenancy clauses that let them cut and run or pay less if those key tenants depart.
Now, many landlords are pushing to eliminate or narrow the escape clauses in the wake of mass department-store closings. That means less flexibility for the remaining tenants.
“Most retailers based in a mall do live or die based on an anchor,” said Andy Graiser, co-president of A&G Realty Partners, a commercial real-estate adviser. “Certain retailers are going to have a risk if certain anchors go away.”
At the highest estimate, Florida’s population is projected to increase by 6 million people for a total population of nearly 26 million by 2030. To put it in perspective, that’s larger than the current population of Australia. Florida can expect that two-thirds of the population growth will occur in just 15 of Florida’s 67 counties. Of the total growth, more than half will occur in just 10 counties.
This means that Florida’s high-population counties are expected to become even more densely populated in the future. While the growth could potentially create issues with congestion, water availability and increased need for schools and other public works, there are numerous opportunities for a booming real estate market, expansion of business and increased capital investment. The larger concentration can also provide more opportunities for transit solutions as the density grows in some areas of our state.
Whether you are an international real estate firm, a developer working on a joint venture or working on a particular development deal, building out your operations and infrastructure can be quite challenging. Hiring talent, managing office space and operations, technology and other management factors can be a significant burden on business and a drain on resources.
One trend that is gaining momentum, especially in the real estate industry, is outsourced accounting. The complexity of accounting and tax issues, technology needs, reporting and planning opportunities all factor into the equation. Tax planning and analytical financial reporting are essential to maximizing the success for real estate developers, so the outsourced model often provides significant value for owners and stakeholders.
“We continue to see significant activity here in New York, both by international and domestic developers and investors,” said Robert Gilman, Partner & Co-Leader of the Real Estate Group at Anchin. “New York is not just the financial capital of the world but the center of the real estate market as well. As developers get creative and look to maximize the limited space available—in the busiest city in the world—real estate companies are looking to drive efficiency and profit maximization, rewarding investors and stakeholders alike.”
Market fundamentals are supporting sustained multifamily investment at lower cap rates than initially anticipated. At the same time, value-add strategies, while still a major trend, require more resources than before, due to changes in residents’ needs and high competition with foreign capital. These are just a few of the insights provided by Robert Cohen, executive vice president for Hudson Capital Properties, in an interview with Multi-Housing News.
Cohen also reflected on how technology is shaping the industry and why new supply volumes are no reason for concern.
How did the multifamily market play out so far in 2018 compared to what you were anticipating?
Cohen: The market this year has diverged from our initial expectations in a couple of different ways. We’ve seen a larger influx of new Class AA properties come online in some of our target markets. This new supply is being absorbed, but rent growth has been tempered. On the investment side, global events have caused somewhat of a flight to safety, mainly to U.S. Treasuries. This, in turn, has kept multifamily fixed-rate agency debt rates in the 4 percent range allowing for sustained multifamily acquisition activity at historically low cap rates, where we might otherwise have expected cap rates to rise this year.
The traditional image of a renter household has undergone some changes over the last 10 years. Renter households are now drawing in those who are older, wealthier and with children. Developers have responded to this demographic demand shift by changing the supply that they’re bringing to market. Rather than continuing to develop a mix of affordable and luxury properties, they’ve shifted to luxury and single-family homes. This leaves a major void in the workforce housing space: one that is impacting millions of Americans each year.
According to Harvard University’s Joint Center for Housing Studies (JCHS), there are currently 43.3 million renter households in the U.S., which account for nearly 37 percent of all households, a number that is continuing to grow at an average rate of roughly one million per year since 2010. Of those renter households, almost half—21 million—are cost-burdened, meaning that their rent accounts for more than 30 percent of their income. Moreover, of those cost-burdened households, 12 million (approximately 28 percent) are spending over 50 percent of their income on rent.
For many people the investment real estate market is off-limits. They can’t buy and they can’t invest because they lack access to traditional lenders, the banks with big vaults and lots of ATMs. For investors, especially flippers, the situation is worse simply because they represent more lender risk.
This is a problem because for many Americans the most direct route to personal wealth has been real estate. For most property owners the numbers have been pretty good but for a few the returns are spectacular: home flippers had an average 49.8 percent return on investment (ROI) in 2017 according to ATTOM Data Solutions. Not quite as good as 2016 when the flipping ROI hit a record 51.9 percent, but still the second-highest average home flipping ROI since 2000 — the furthest back data is available.
But the situation is changing as a growing number of lenders catering to the investment property world emerges. ATTOM reports that 207,088 U.S. single family homes and condos were flipped in 2017 and of this number 34.8 percent were financed — a total of 72,000 units. The dollar volume for financed flips was $16.1 billion, up 27 percent from 2016 to a 10-year high.
ATTOM Data Solutions, curator of the nation’s premier property database, today released its Q2 2018 U.S. Home Affordability Report, which shows that the U.S. home prices in the second quarter were at the least affordable level since Q3 2008.
The report calculates an affordability index based on percentage of income needed to buy a median-priced home relative to historic averages, with an index above 100 indicating median home prices are more affordable than the historic average, and an index below 100 indicating median home prices are less affordable than the historic average. (See full methodology below.)
Nationwide, the Q2 2018 home affordability index of 95 was down from an index of 102 in the previous quarter and an index of 103 in Q2 2017 to the lowest level since Q3 2008, when the index was 86.
Unemployment rates were lower in May 2018 than a year earlier in 350 of the 388 U.S. metropolitan areas, higher in only 20 areas, and unchanged in 18 areas, the Bureau of Labor Statistics reported on Wednesday, June 27. Ninety-six areas had jobless rates of less than 3 percent—the national rate is currently 3.8 percent—and a mere two areas are suffering unemployment rates of more than 10 percent.
Farmington, N.M., had the largest year-over-year unemployment rate decrease in May, down 2.2 percentage points. Another 52 metro areas had rate declines of at least 1 percentage point since a year ago. The largest year-over-year unemployment rate increase occurred in the Morgantown, W.Va., metro area (up 0.8 percentage points).
The federal government has long encouraged owning a home over renting. Housing subsidies in the tax code effectively lower the after-tax cost of homeownership, which has helped taxpayers move out of residential rentals and into their own homes. The Jeffersons might not have credited tax policy for it in their 1970’s sitcom, but it has assisted taxpayers in “moving up” to bigger and better homes. The Tax Cuts and Jobs Act of 2017 (TCJA) makes sweeping changes to the tax code for individual taxpayers that directly impact their ability to transition from renting to owning their home.
About 34 million households, or 44 percent of U.S. homes, carry a mortgage with annual interest charges that exceeded the prior standard deduction. With the new standard deduction, that group shrinks to around 14 million, or 15 percent of U.S. households, according to the National Association of Realtors (NAR).
And while the TCJA nearly doubles the standard deduction, it caps the deduction for state and local taxes — including income, sales, and property taxes — at $10,000 for both single and married taxpayers. This one-two punch could significantly impair some taxpayers’ appetite for homeownership.