Features

NEW YORK CITY — Fifth Avenue in Manhattan has retained its No. 1 ranking as the world’s most expensive retail destination at approximately $2,000 per square foot, which is unchanged from last year. That’s according to the 33rd edition of the Cushman & Wakefield (NYSE: CWK) Main Streets Across the World, an annual report that examines retail rental rates around the world in “high street” locations, referring to bustling, high-end retail districts. Fifth Avenue is world-renowned for its luxury offerings, including Bergdorf Goodman, Prada, Saks and Tiffany, among others. Additions to Fifth Avenue’s retail store count this year include a new store for Harry Winston and newcomers to the corridor Asics, Dyson, Skechers, Johnston & Murphy and Bandier, according to online directory Visit 5th Avenue. While on par with the rents charged last year, Fifth Avenue’s average retail rate is up 14 percent from pre-pandemic levels, making it only one of three high streets in the top 10 that have increased rates since that time span. The No. 2 retail destination in Main Streets Across the World is Milan’s Via Montenapoleone at $1,766 per square foot. The district jumped a spot into second from last year’s report by pushing rental …

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Affordable Housing Financing Timeline Quote Tracy Peters

  Developers are finding it tougher than ever to finance affordable housing. And often, the biggest hurdle for the sector’s borrowers involves construction — either obtaining that initial loan at a manageable cost or qualifying for take-out financing after a protracted construction period — which has strained resources and delivery schedules for a number of developments. Limitations on rent increases make the industry especially vulnerable to rising costs, and expenses today have risen precipitously across the board. Rents have also grown, but not on pace with construction and operating costs driven up by inflation, wage pressures, soaring insurance premiums and a series of interest rate hikes, observes Tracy Peters, a senior managing director on Lument’s affordable housing production team. “Borrowers are squeezed by a number of things in this marketplace,” Peters says. “The fed funds rate climbing 5 percent over the last two years means the interest rates on construction loans have basically come up 5 percent or more over that time. Now folks who had budgeted for a much lower interest rate — if they are still in construction mode — are trying to figure out how to deal with these higher interest rates.” At the same time, the …

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Rivermark-Baton-Rouge-Exterior

By Barry Hand, principal at Gensler Recently at the Urban Land Institute’s (ULI) fall conference, there were multiple themes that percolated upward and were left imprinted on the minds of the thousands of attendees moving from one session of experts to the next. These topics included: Upon reflection, each of these issues has been brewing for a while and is not surprising. In many ways, the individual topics are related and can be solved together. Lack of affordable housing in numerous markets for all income levels is an accelerating issue due to population growth, regulatory/zoning challenges, land costs, horizontal sprawl, construction costs, NIMBYism and the cost of capital. Each of these issues fuels concerns for lenders that are already potentially facing stress within their commercial real estate portfolios. The solution will require a multi-faceted approach. Most metropolitan areas are seeing population growth. These same communities are chasing stronger commercial tax bases as well as the same employers and users who need accessible, mixed-income workforce housing. Again, there is no single magic solution. But legislation and zoning changes to allow greater residential densities and/or residential conversions from unoccupied or blighted commercial structures will bring quick and creative solutions for housing and commercial …

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— By Brett Silverstein — With uncertainty looming large and terms like risk, crash and recession swirling around the industry, it comes as no surprise that some investors are clinging to their cash reserves. But savvy investors go back to the fundamentals of the real estate cycle. While the economic conditions that influence the cycle are often different, such as the Dot-Com bubble, the Global Financial Crisis and, most recently, COVID, the predictability of the real estate cycle is consistent. In my opinion, a sound acquisitions strategy today is one grounded in acquiring high-quality assets below replacement cost in Intermountain West markets that exhibit strong fundamentals, such as outsized rent growth, continued strong household formation patterns and limited future supply growth. Distress leads to discounts Amidst the prevailing market turbulence, the acquisition of existing assets at a discount to the cost of building new ones becomes an even more compelling proposition. Replacement cost alone may not suffice as an investment metric, but the combination of discounted prices and robust market fundamentals creates the secret sauce of sound investment decisions. Housing is an essential good that is always in demand and has historically inflated over time. The foundational concept of “heads …

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77-Corporate-Drive-Bridgewater-New-Jersey

— By Julian Freeman, Dave Wensley and Gabe Pitassi — With steep vacancy rates impacting traditional office markets due to the headwinds of higher interest rates, short-term economic uncertainty and long-term remote/hybrid work uncertainties, underutilized traditional office buildings may become liabilities before the end of their anticipated economic life. Owners of these properties may consider a conversion — an adaptive reuse or repurposing — to access higher rents and occupancy rates.  In view of nationwide housing shortages, especially in California, converting office to multifamily has received much attention as a logical move. However, such a conversion is not always viable from a financial, structural, legal or location perspective. An alternative option may be to repurpose an office building for life sciences use. Such a conversion, while posing its own unique challenges, may provide more realistic options than a conversion to residential use for many owners and properties. Challenges in converting to residential Converting an office building to residential use presents challenges on multiple fronts. Zoning laws vary based on property location and usage, and the property may need to be rezoned to a different classification to allow multifamily uses. Rezoning requires local government approval and public hearings, which can take months …

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Jeff Salladin Loan Workout quote

Following the financial markets crash 15 years ago, banks and other lenders began working with commercial real estate (CRE) borrowers who had run into trouble. Solutions included loan extensions, loan sales, recapitalizations and foreclosures. Today lenders are pulling out the playbook again. “We have seen a huge number of loan workout deals come across our desk,” says Jeff Salladin, a managing director with Dallas-based private debt fund Revere Capital. “Any lender that holds loans on their books is seeing the same thing.” Back in 2008, dodgy and highly leveraged residential and CRE loans — along with the emergence of exceedingly risky debt derivatives created by Wall Street — eventually crashed, causing the credit market to collapse. Today credit is still available, but the cost of it has spiked over the last 18 months. Consequently, many commercial properties owners have seen values plummet, making it difficult to find refinancing. The Federal Deposit Insurance Corp.’s (FDIC) imminent auction of Signature Bank’s $33 billion in commercial property loans and other assets is expected to attract bids as much as 40 percent below face value, according to The Wall Street Journal. That’s just the latest gloomy bellwether regarding CRE values and underscores the predicament …

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The editors of REBusinessOnline.com are conducting a brief online survey to gauge market conditions in 2024, and we welcome your participation. The survey should only take a few minutes to complete. Questions range from property sectors that you are most bullish on heading into 2024 to trends in deal volume to your outlook for interest rates. The results of our 13th annual survey will be compiled and published in the January issues of our regional magazines. Conducting these surveys is part of our mission at France Media to provide readers with indispensable information, and we couldn’t do it without your help. To participate in our broker/agent survey, click here. To participate in our developer/owner/manager survey, click here. To participate in our lender/financial intermediary survey, click here. (Note: Please remember to click on “done” to properly submit the survey.)

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Wells-Fargo-Bank-Building-Houston

Investment sales volumes of commercial properties have been on a slow-but-steady decline since the Federal Reserve began increasing interest rates 18 months ago, but that doesn’t mean that investors aren’t eager to deploy capital in the face of falling prices and valuations. As interest rates have steadily risen, so too have capitalization rates, and commercial buyers that rely heavily on debt to fund purchases have been forced to scale back on new acquisitions. With fewer offers, sellers have seen their prices drop off from two years ago, when assets in classes like multifamily and industrial experienced record levels of rent growth, price appreciation and cap-rate compression. Yet it remains unclear just how close to the bottom the market actually is, or whether the nadir of pricing and deal volume has already been reached. What is clear is that in downtimes such as these, investors of all types are looking for opportunities to “buy the dip.” Particularly for choice assets, enduring some interest-rate-induced pain in the short run is a fair trade-off for gaining a long-term foothold in high-growth markets — and at a premium price, no less. The disconnect between demand and deployment was detailed in the Emerging Trends in …

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Bryan Rader Multifamily WiFi Pavlov Media

Multifamily residents want to take their internet connections with them beyond their unit’s four walls and throughout the complex. The National Multifamily Housing Council has found for years that 90 percent of renters say good internet access is a necessity. But the meaning of good connectivity has changed. “Ten, fifteen or twenty years ago, the most popular trend was cocooning — where people would go to work, come home and run into their apartment. They’d close the door, and you wouldn’t hear or see from them again until the next day,” says Bryan Rader, president of MDU at internet service provider Pavlov Media. “Today, multifamily renters spend more time around the community,” he continues. “Developers are playing to that lifestyle change by building amenities and encouraging residents to spend time together. Having a really strong managed Wi-Fi network that is safe, secure and authenticates the user is very valuable.” Put more simply, Wi-Fi within amenities is important to renters. Take fitness centers, for example. When was the last time you saw anyone on a treadmill without headphones relaying music from the internet through a phone or tablet? The move toward property-wide internet demand started in universities as students needed internet …

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Lee Associates Q3 Report Retail

Slower absorption and rent growth plagued industrial, office and multifamily asset classes across the United States in the third quarter, as outlined in Lee & Associates’ 2023 Q3 North America Market Report. Some regional exceptions were able to buck the overdevelopment trend, but retail was the only property type to avoid the quarter’s shift toward rising vacancy rates. High interest rates, slower rent growth and fear of overbuilding have contributed to lower construction starts in every sector. The full Lee & Associates report is available — including breakdowns of factors like detailed vacancy rates, inventory square footage, cap rates outlined city by city, market rents and more — here. The analysis below provides an overview of industrial, office, retail and multifamily real estate sectors alongside sector trends, economic background as well as geographic exceptions within each property type. Industrial Overview: Absorption Continues Slowing, Inventories to Spike Demand for industrial space remained positive in the United States in the third quarter, but growth this year has lost steam compared to strong net absorption totals of the last two years. U.S. net growth in the third quarter totaled 29.9 million square feet compared to 94 million square feet for the same period last year. …

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