|Situs RERC Industrial Sector Investment Conditions 3Q 2017
Each quarter, Situs RERC surveys hundreds of investors in the U.S. Among other metrics, survey respondents are asked to provide ratings of the investment conditions for different property types. During third quarter 2017, Situs RERC’s investment conditions ratings remained mixed across the property sectors surveyed, but investment conditions improved for most property sectors compared to the previous quarter. It comes as little surprise that industrial warehouse investment conditions continue to be superior to all other property sectors considering the growth in e-commerce and its need for distribution centers.The industrial warehouse sector maintained the best investment conditions among the property sectors, increasing to 7.2 (on a 10-point scale) in the third quarter, up from a 6.8 rating in the second quarter.
Situs RERC’s institutional investment survey respondents indicated that buying conditions for industrial warehouse properties during third quarter 2017 were the most ideal. For industrial R&D and flex properties, holding was most popular among respondents.
Situs RERC’s expected rental growth rates for the warehouse and flex sectors increased 10 basis points to 3.1 percent and 2.6 percent, respectively, during third quarter 2017, while the R&D sector decreased 10 basis points to 2.5 percent. Expected expense growth rates were flat for all three sectors at 2.7 percent.
Click here to see the full chart of current investment conditions for all sectors.
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U.S. Mall Owner GGP Rejects Brookfield Property’s $14.8 Billion Offer
GGP Inc (GGP.N), one of the largest owners and operators of U.S. shopping centers, has rejected a $14.8 billion buyout offer from its biggest shareholder, Brookfield Property Partners LP (BPY.O), people familiar with the matter said on Sunday.
Brookfield Property made a $23-per-share cash and stock offer last month for the 66 percent of GGP it does not already own. A combination of Chicago-based GGP and Brookfield Property would create one of the world’s largest publicly traded property companies.
Brookfield Property is considering a new offer for GGP after a special committee of GGP’s board directors turned down its Nov. 11 offer as inadequate, and negotiations between the two companies are expected to continue, the sources said.
The companies do not plan to make a new announcement unless their negotiations lead to a deal or end unsuccessfully, the sources added, asking not to be identified because the discussions are confidential.
read more: Reuters
Fed Getting Ready to Raise Rate as Retail Sales, but not Inflation, Picks Up
The Federal Reserve is going to raise the cost of borrowing this week in a move widely anticipated by the money changers on Wall Street. But that’s not the only thing going on.
The latest batch of economic mile-markers will also deliver a peek at how holiday shopping is shaping up and whether inflation is still under lock and key.
The outlook for the holiday season looks good — maybe the best since the Great Recession. Sales got off to a great start on Black Friday weekend, and a massive shift toward online shopping has sent shippers scrambling to catch up. Packages are taking longer to arrive, and it might get worse.
The federal funds rate currently is in a range of 1.0 percent to 1.25 percent; the Fed is expected to raise the rate by 25 basis points.
read more: Marketwatch
Commercial Real Estate Expected to Bounce Back in the Coming Year
No segment of the real estate market fell harder this year than commercial sales, a category that includes offices, multifamily residential rental buildings, land and hotel deals.
Commercial developer Cushman & Wakefield projects about $32.5 billion of sales across New York City by the end of the year, a nearly 44% drop from the $57.8 billion of transactions it recorded for 2016.
The anemic sales have the industry wondering whether the market will rebound next year.
“We have been in the midst of a quintessential correction,” said Bob Knakal, chairman of New York investment sales at Cushman, who noted that the number of yearly commercial sales transactions in Manhattan has dropped 45% from a peak in 2014, and dollar volume has fallen 70% from a record year in 2015. “What happened is downward pressure got exerted on value and bids came in lower than sellers wanted to accept, and so the number of transactions declined.”
read more: Crain’s
HNW Investors Find an Attractive Niche in Secondary Market Hotels
Tech billionaires Michael Dell and Bill Gates collect trophies—trophy hotels, that is. Both men have sunk millions of dollars into high-end hotels, like a Four Seasons resort in Hawaii owned by Dell and a Four Seasons resort in Mexico owned by Gates.
“I don’t mean for this to be pejorative and I don’t mean to malign anyone, but there is some cachet to being able to ‘play’ with a hotel,” says Daniel Marre, co-chairman of the hotels and leisure practice at Seattle-based law firm Perkins Coie LLP.
For a lot of other high-net-worth investors, however, trophies are merely shiny objects that gather dust on a shelf. Increasingly, these HNW investors would rather snap up more modest hotels—like a Hilton Garden Inn or a Courtyard by Marriott—in secondary and tertiary markets, thereby eschewing prestige in favor of profit.
According to a report from commercial real estate services company JLL, full-service hotels in the high-end category accounted for more than two-thirds of single-asset deals in the third quarter of 2017. Transaction volume during the quarter totaled $6.4 billion, with publicly-traded REITs, private equity funds and foreign investors driving the bulk of those deals.
read more: NREI
CMBS in 2018: The Rating Agencies’ Predictions
After a stellar 2017, what’s in store for CMBS next year? We asked the industry experts to opine.
Erin Stafford, Head of North American CMBS at DBRS
We are expecting volume to be flat compared to 2017. The lion’s share of the increase in U.S. CMBS volume in 2017 came from increased issuance in the single-asset, single-borrower (SASB) market, while the conduit market in 2017, after adopting risk retention, is likely to end up close to flat from the previous year. It is likely that the SASB volume could remain strong as many of those transactions are short-term in nature and may need to be refinanced into the CMBS market as interest rates remain low.
James Manzi, Senior Director at S&P Global Ratings
We’re expecting about $85 billion in CMBS issuance next year, which is slightly lower than this year’s total, which we expect to be around $90 billion. Lower CMBS loan maturities are a headwind, while continued activity in the single-borrower space and the potential for more multifamily collateral making its way into conduits are tailwinds.
read more: Commercial Observer
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