|GOP Tax Reform Takes Shape
The much-anticipated Republican tax reform legislation — The Tax Cuts & Jobs Act — was presented last Thursday by Chairman of the Ways & Means Committee Kevin Brady (R-TX). The bill represents the beginning of the formal process of introducing the meaningful tax reform long-promised by the GOP. The committee plans to vote on the bill today.“There is a lot to unpack, but on the whole this seems good for business,” says Steve Powel, CEO of Situs. “The top U.S. corporate rate gets a hefty cut from 35 percent to 20 percent, putting American companies on more equal footing with foreign competitors. This should encourage some domestic firms to be more active in the marketplace.”
Two provisions particularly relevant to the CRE industry are the continued allowance of deduction of interest expense and IRS section 1031 exchanges. Many in the industry see these as critical steps for allowing continued CRE market liquidity and supply/demand balance.
House leaders have laid out an optimistic timeline, showing that they plan to get the bill through Congress and in front of the Senate before Thanksgiving, with an ultimate goal of getting the bill signed into law by Christmas.
“The timeline is aggressive, but it shows that the lawmakers are taking this seriously,” said Powel. “By setting these milestones, they’re indicating that this is their No. 1 priority.”
Hiring Rebounds in October; Unemployment Rate Falls to 4.1%
The U.S. jobless rate fell to a 17-year low in October and employers hired at a strong pace, showing the labor market bounced back from recent hurricanes.
Nonfarm payrolls rose a seasonally adjusted 261,000 in October, the Labor Department said Friday. That was a pickup from the prior month, but undershot economists’ expectations for 315,000 new jobs.
Meantime, the unemployment rate ticked down to 4.1%, its lowest level since December 2000. The jobless rate, which changed little over the course of 2016, has dropped from 4.8% to 4.1% since the start of this year, a sign the labor market is heating up.
Nonetheless, wages failed to break out in October, rising 2.4% from a year earlier, a slowdown from the prior month.
“With the swings from the hurricanes now largely behind us, the longer-term challenge of wage growth returns to the foreground,” said Jed Kolko, chief economist at job site Indeed.
September’s payrolls data, initially reported as the first drop in seven years, were revised to show employers actually created 18,000 new jobs that month, extending the economy’s streak of job gains to a record 85 straight months.
read more: WSJ
Hurricane-Damaged Jobs Number Won’t Sway the Fed from Rate Hike
October’s flat wage growth and big drop in labor participation look like negatives for an economy that has been steaming along, but economists are writing it off as storm damage and expect the Fed to raise interest rates.
October job growth was 261,000, less than the 315,000 expected by economists in a spring back from September’s hurricane-related decline. September data was revised upwards by 51,000 jobs so job creation is now a positive 18,000 for the month. Job growth for the two months averages 140,000, below the recent trend.
The unemployment rate in October fell to 4.1 percent, a 17-year low, from 4.2 percent, but economists point to a decline in the participation rate of 0.4 percentage points to 62.7 percent as the cause. Wage growth was flat after a surprise 0.5 percent gain last month.
“We just had a lot of people drop out of the labor force. The size of the labor force fell 765,000. … It looks to me like a lot of seasonal workers probably fell out this month, and that explains the participation rate,” said Ward McCarthy, chief financial economist at Jefferies.
McCarthy said the number of workers who joined the workforce in September was unusually high. “I think you should look at the two [months] combined, which gives you a pretty solid, steady state.”
read more: CNBC
As Office Market Cools Down, Suburban Buildings Outperform CBD Properties
Investment sales in the office sector continued to decline in the third quarter, according to a recent report from New York City-based research firm Real Capital Analytics (RCA). Transaction volume in the sector totaled $28.7 billion during the quarter, marking an 18 percent year-over-year decline. Sales of office assets in central business districts (CBDs) declined by 49 percent during the period, while sales of suburban office buildings increased by 4 percent.
With this market cycle winding down, researchers at real estate services firm Colliers International expect transaction volume to continue to trend down through the rest of the year, with moderate appreciation in values, according a 2017 Capital Flows Midyear Update.
“Were in the last part of cycle and property returns have been historically high,” says Colliers Chief Economist Andrew Nelson.
Prices on office assets in the third quarter increased by 5.1 percent, according to RCA. Continuing price escalation is the result of moderate construction and high investor interest in this sector, despite moderating demand for office space over the last few years due to changes in the workplace environment. With employers offering telecommuting and other flexible work options, space per new employee has dropped in half over the past few years, Nelson says.
With prices now at record highs, “there’s pullback by investors and the investor pool shrinks,” Nelson says. “We’re in the late stages of the cycle, so now is generally not the time to take a risk on an empty office building, hoping the market will return.”
read more: NREI
Under Powell, Wall Street Can Expect Steady Wins on Regulation
In Jerome Powell, banks won’t get a Federal Reserve chairman who is hell-bent on ripping up financial rules. But in some ways, that’s better for Wall Street.
With a resume steeped in industry experience and long-standing relationships with financial executives, Powell is expected to take a measured approach to rolling back regulations adopted in the wake of the 2008 economic crisis. He’s seen as a practical, not ideological, watchdog who will be able to get things done.
That gibes with what big banks have long expected from President Donald Trump’s presidency. They want the Fed and other agencies to take the lead in easing post-crisis constraints, particularly because the Republican-controlled Congress has made little headway dismantling the Dodd-Frank Act.
“For Wall Street, Powell is a solid choice,” said Ian Katz, an analyst with Capital Alpha Partners in Washington. “He supports deregulation but not to an extreme. He’s a known quantity and he’s regarded as a thoughtful consensus-seeker. The finance industry views him as safer choice than someone who would want to blow up the place and scrap all the Dodd-Frank rules.”
read more: Bloomberg
Nation’s Largest Mall to Close on Thanksgiving, Pay OT on Black Friday
For the second year in a row, Mall of America is giving its employees Thanksgiving Day off. It’s also adding something new.
The 5.6-million-square-ftoot Mall of America, the largest retail and entertainment destination in North America, is going one step further this year with regards to its employees. After “much consideration,” mall management said it is treating Black Friday as a “seventh holiday” for employees that work directly for the mall and Nickelodeon Universe. Mall employees who are eligible and work on Friday, Nov. 24 will receive holiday pay.
“As the busiest day in the retail industry, we believe Mall of America employees dedicating their time on Black Friday should be rewarded with holiday pay,” Mall of America executive VP Rich Hoge and senior VP Jill Renslow said in a letter to employees. “We value our employees and understand that you are at the front line of assuring outstanding guest service.”
The mall’s holiday pay does not impact the employees of the center’s 520 stores, restaurants and attractions. But a “fun” holiday addition will be announced in the coming weeks to honor these employees during December, according to mall officials.
read more: Chain Store Age
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