Situs Newswatch 10/26

Real Estate Investors Seeking Shelter from the Brexit Storm

About 70,000 jobs could leave the finance industry in the U.K according to the lobby group TheCityUK. Those seeking to move overseas face a problem reports Bloomberg — the lack of development and growing domestic demand has already pushed vacancy rates for prime space in the business districts of Paris, Frankfurt, and Amsterdam to the lowest levels in about a decade.

Real estate investors are now seeking to capitalize on that shortage by buying partially vacant offices and plots with the potential to develop buildings the banks may need.

Migration of the finance industry from the U.K. into continental Europe could spell trouble for Britain’s financial and real estate markets. To research the extent of this impact, Situs RERC surveyed investors in Europe following the Brexit decision. When asked how the vote would affect commercial real estate, economic and financial outcomes, survey respondents felt that Brexit would have both a moderate negative impact on U.K. commercial real estate (CRE) and the British economy as a whole. For U.K. CRE, Brexit was expected to have a particularly negative effect on valuation levels, transaction volumes, and prices.

For Situs RERC’s full analysis of the Brexit decision on the U.K. and Europe as a whole, download the most recent edition of the Situs RERC Real Estate Report-European Edition for free by clicking here.

And stay tuned for Situs RERC’s 3Q 2016 U.S. Real Estate Report coming in November. For subscriptions to this quarterly report and all other Situs RERC products, visit store.rerc.com

Brexit – The Impact On Property Markets: On November 4th, Situs’ own Prasad Chaganti will be speaking on a panel addressing this topic. Click here to register for or to learn more about the event.

Bankers Prepare for Exodus From London

Banks will start moving operations out of the U.K. late this year and early next as they anticipate a hard Brexit. That’s according to  Anthony Browne, chief executive officer of the banking lobby group BBA, writing in the Observer newspaper.

International banks’ “hands are quivering over the relocate button,” he wrote. “Many smaller banks plan to start relocations before Christmas; bigger banks are expected to start in the first quarter of next year.”

Without identifying any banks by name, he said lenders can’t wait until the last minute and have to “plan for the worst,” especially because “public and political debate at the moment is taking us in the wrong direction.”

Handily, some real estate companies are already finding them new digs.  A property company managed by Schroders Plc is bidding for an office building in Frankfurt, joining CBRE Global Investors LLC and Standard Life Plc, which are seeking to purchase office space in cities from Dublin to Amsterdam.

Real estate investors are seeking to capitalize on a shortage of available offices in Paris, Frankfurt and Amsterdam, Bloomberg’s Jack Sidders reports. The lack of development and growing domestic demand has already pushed vacancy rates for prime space in the business districts of those cities to the lowest levels in about a decade, according to broker Savills Plc.

read more: Bloomberg

NYC 2016 Construction Hits Record 

New York City’s construction industry will top $43 billion in spending by the end of the year, a record high and a 26 percent increase from last year, a trade organization announced in a new report.

The New York Building Congress is set to discuss the news Tuesday during a breakfast forum, where Deputy Mayor Alicia Glen plans to announce the city’s latest tally of below-market-rate housing financing —17,768 new apartments and 37,541 the city has preserved.

If the Building Congress projection holds true, 2016 will mark the first year in city history that construction spending will have exceeded $40 billion. Construction spending totaled $34.3 billion last year. In 2007, before the industry was hurt by the recession, construction spending in the city totaled $31.1 billion, which the organization found would equal $41.6 billion today if measured in “constant 2016 dollars.”

The organization is projecting similar totals over the next two years — $42.1 billion next year and $42.3 billion in 2018, according to the report.

The added spending translates into 147,100 projected jobs throughout the city this year, a nearly 9,000 increase from last year, according to the report.

The increase is buoyed by record-breaking spending on residential construction — $13.4 billion projected by year’s end — and $17 billion on other types of private construction, including office space, hotels and entertainment venues.

Government spending on public works projects — such as bridges, roads and mass transit — is forecast to hit $12.7 billion this year.

read more: Politico

Fed’s Task Next Week: Signal December Rate Rise

Federal Reserve officials, wary of raising short-term interest rates amid the uncertainty surrounding the U.S. presidential election, are likely to stand pat at their November policy meeting and remain focused on lifting them in December.

Their challenge will be deciding how strongly to signal their expectation of a move at their last scheduled meeting of the year, Dec. 13-14. Market expectations suggest officials may not need to fire strong new warning shots: Traders in futures markets already place a 74% probability on a Fed rate increase by then, according to CME Group.

That could leave their November policy statement little changed from September, when officials said the case for an increase in their benchmark federal-funds rate had strengthened, but they wanted to wait “for the time being” for more evidence of a strengthening economy.

Investors have long been skeptical about a move at the Fed’s meeting Nov. 1-2, just a week before Election Day, putting a 9% probability on an increase then.

Officials, in public remarks and recent interviews, have made clear they expect to raise rates before the end of the year. But with the jobless rate holding steady around 5% and inflation below their 2% target, they aren’t in a rush.

“There isn’t this tremendous urgency to act on monetary policy right now,” New York Fed President William Dudley told The Wall Street Journal in an interview Oct. 14. “It’s not like if we wait a meeting or don’t wait a meeting that it has huge consequences for the trajectory of the economy.”

Mr. Dudley said he expects the Fed will raise interest rates this year, “subject to the economy continuing to evolve in line with my expectation.”

read more: Wall St Journal

Atlantic City Bets on Belt-Tightening

Atlantic City plans to sell land, lay off 100 more workers, pay down most of its $500 million debt and slash other expenses during the next five years to fight off a threatened state takeover of its assets and decision-making power.

Mayor Don Guardian unveiled the city’s long-awaited fiscal turnaround plan Monday evening, just days before New Jersey lawmakers and Republican Gov. Chris Christie’s administration are to consider whether the struggling seaside gambling resort can no longer be trusted to manage its own affairs.

The city will use $110 million from the sale of the historic Bader Field former airport site and $105 million in bonds it will issue to pay off much of its massive debt, part of which was caused by successful tax appeals from casinos whose property has lost tens of millions of dollars as the city’s gambling market continues to shrink.

The plan envisions a $103 million settlement with the Borgata, which is owed more than $150 million in tax refunds, but the city and casino have not yet agreed on a deal.

Guardian said the plan would balance budgets for the next five years without raising municipal taxes and create a small surplus.

“There is no doubt that this is the way forward for Atlantic City’s future,” said Guardian, the Republican mayor of the heavily Democratic city. “Not only did we find a way not to raise taxes on the residents of Atlantic City, but we also outline how we will steadily decrease our dependence on state aid over the coming years.”

read more: Associated Press

Pizza, Parks, and Pet Spas: Shoppers Will Pay More for Retail Experiences

Shoppers at the new Pirch flagship store in Manhattan’s SoHo neighborhood don’t have to wonder how its pricey appliances and plumbing fixtures will work in their homes.

A chef stands at the ready, eager to whip up a dish on that nifty six-burner professional-grade stove you’ve been eyeing. Worried that a dishwasher’s timer will be too loud for your tiny studio apartment? Demo it, inside one of the store’s 24 kitchen setups. You can even try out the shower head of your dreams. (Don’t worry; the store has towels.) “It’s kind of retail 2.0,” says Andrea Dorigo, chief executive officer of the nine-store chain. “It’s like you’re buying a car from a race-car driver. You’re sitting there, and you’re watching the things you want to purchase in action.”

Pirch’s strategy—turning its stores into homewares theme parks where customers are invited to play house—is a nod to one of retailing’s hottest trends: selling experiences. Americans increasingly would rather spend their money making memories—travel, sporting events, concerts, meals out—than on another outfit. So, after years of choosing the speed and wide selection offered by big-box retailers such as Home Depot or online merchants like Amazon.com, customers are demanding higher engagement if they’re going to buy something in a store. Nimble upstarts such as Pirch and eyeglass retailer Warby Parker have made their stores into exciting destinations rather than places to make a quick purchase. Meanwhile, established brands such as Urban Outfitters are highlighting the hands-on aspects of their stores. That’s raising the bar for rivals, says Doug Stephens, founder of consultant Retail Prophet, and more brands will be trying to sell experiences along with their goods next year. Says Stephens: “That’s where the whole industry is headed.”

read more: Bloomberg

Retailers Rushed to Hire for Holidays, a Sign of Tight Labor Market

Retailers are scrambling to hire holiday-season workers despite an unusually early start on recruiting this year, creating a collision among employers for temporary help in a tight labor market.
Data from job-search site Indeed.com shows retailers, and the warehouse and logistics firms they compete with for seasonal labor, started searching for temporary workers in August, a month earlier than in recent years. This suggests retailers and other firms “anticipate stronger consumer demand and expect that it will be harder to find the people they want to hire,” said Indeed economist Jed Kolko.

Last year, more than one in four retail workers hired in the fourth quarter of 2015 started their jobs in October, the highest share on records back to the 1930s.

Macy’s Inc. for the first time hosted a national hiring event on Sept. 30 at all stores. Retailers are scrambling to hire holiday-season workers despite an unusually early start on recruiting this year, creating a collision among employers for temporary help in a tight labor market.

Data from job-search site Indeed.com shows retailers, and the warehouse and logistics firms they compete with for seasonal labor, started searching for temporary workers in August, a month earlier than in recent years. This suggests retailers and other firms “anticipate stronger consumer demand and expect that it will be harder to find the people they want to hire,” said Indeed economist Jed Kolko.

Last year, more than one in four retail workers hired in the fourth quarter of 2015 started their jobs in October, the highest share on records back to the 1930s.

read more: Wall St Journal

Fake Divorce Is Path to Riches Buying Hot China Real Estate

Earlier this year, Mr. and Mrs. Cai, a couple from Shanghai, decided to end their marriage.

The rationale wasn’t irreconcilable differences; rather, it was a property market bubble. The pair, who operate a clothing shop, wanted to buy an apartment for 3.6 million yuan ($532,583), adding to three places they already own. But the local government had begun, among other bubble-fighting measures, to limit purchases by existing property holders. So in February, the couple divorced.

“Why would we worry about divorce? We’ve been married for so long,” said Cai, the husband, who requested that the couple’s full names not be used to avoid potential legal trouble. “If we don’t buy this apartment, we’ll miss the chance to get rich.”
China’s rising property prices this year have been inspiring such desperate measures, as frenzied buyers are seeking to act before further regulatory curbs are imposed. While the latest figures out Friday show easing in some of the hottest cities such as Beijing and Shanghai, the cost of new homes surged by the most in seven years in September.

read more: Bloomberg