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As the Olympics move into their first full week in Rio, Situs takes the opportunity to look back four-years when the summer games were held in London — and we pose the question: Has the Commercial Real Estate Market Improved since then?
CRE Going for Olympic Gold
As Olympic athletes compete in Rio, the commercial real estate market has gone for the gold since the London Summer Olympics of 2012.
Cheap money has fueled new construction, and CRE values have more than doubled from lows following the financial meltdown.
“Although economic growth has not been as strong as expected over the course of the past four years, CRE pricing and value have delivered superior performance compared to the competitive investment opportunities in the U.S.,” said Situs RERC President, Ken Riggs.
Situs’ CRE Attractiveness Index, which gauges institutional investors’ changing preferences for CRE over traditional asset classes, confirms this trend.
The preference for CRE has declined in the past few quarters, but it is still considered the most attractive investment option – a trend since the last Summer Olympics.
Multifamily residential housing won the Gold Medal, partially because millennials are moving to urban areas and home ownership levels are falling to 51-year lows. Apartment vacancy rates have remained relatively unchanged (the lowest vacancy level of all property types) since the last Olympic games, hovering around five percent despite huge building growth. In addition, going-in cap rates and discount rates are the lowest for the apartment sector, according to Situs RERC research.
Among the remaining major property types, the Silver Medal goes to industrial properties and the Bronze Medal goes to office properties. Vacancy and discount rates decreased the most for the industrial sector, likely driven by increasing demand for e-commerce and the resulting need for expedited shipping. Going-in cap rates declined most for the office sector, particularly in suburban areas.
In general, CRE prices maintained a steady growth over the past four years, according to Real Capital Analytics. From July 2012 to July 2015, CRE prices climbed over 60 percent. In the year leading up to the Rio Olympics, prices did stabilize – but since July 2016, prices began to increase again.
Olympics: Banks Make Pitch for Hearts and Minds
At both the Democratic and Republican conventions, the nation’s biggest banks were again cast as the bad guys, criticized as being too big and too risky.
This week, as the Olympic Games begin in Brazil, one of the big banks, Citigroup, is offering a rebuttal with a series of prime-time television and digital ads featuring images of sweaty athletes, the Space Shuttle and an early A.T.M.
“Our business is helping Americans make progress,” the ad’s narrator says, as a runner with a prosthetic leg sprints down a track.
Since the 2008 financial crisis, American banks have sent millions of dollars on advertising, consultants and social media initiatives, seeking to portray themselves as something other than greedy risk-takers. And yet, eight years later, anger and resentment persists.
So the banks are ramping up their efforts — and trying new ways — to convince the public that they are not as bad as politicians make them out to be.
Citigroup, which was rescued by taxpayers after nearly collapsing during the financial crisis, is using its role as the sole banking sponsor of the Summer Olympics and Paralympics to make the case for the virtues of being a big global bank.
Olympics: Prices Jump in Rio, Now World’s Most Expensive Airbnb City
It’s not just Rio de Janeiro hotel prices that are soaring ahead of the Olympics. The Summer Games have turned Rio into the world’s priciest destination on lodging platform Airbnb Inc.
In a new Bloomberg index released Wednesday, Rio de Janeiro lodging on Airbnb cost $206 per day on average, exceeding that of No. 2 Miami and No. 3 San Francisco. A stay in a private Rio dwelling was more than twice as costly as Paris, according to the index of global cities with at least 100 local listings. It took average prices for two blocks of time that are six months apart and include part of the Olympics — Aug. 1 to 10 — as well as Feb. 1 to 10, 2017. Data were collected between May 1 to May 10, 2016.
Olympics: Economists Question Wisdom of Hosting Games
Brazil is suffering its worst recession since the 1930s, inflation is high, and its sovereign rating has been downgraded to junk.
The country is also stuck in a political limbo of sorts, with its suspended president, Dilma Rousseff, facing an impeachment trial. Hopes a new administration could turn the country around have helped the real and equities notch up impressive rallies this year, but the outcome remains cloudy.
“The Rio situation right now is tragic. It’s very depressing. It’s a country that never should have tried to host the Olympics,” sports economist and Smith College professor Andrew Zimbalist told CNBC’s “Street Signs” on Wednesday.
“It doesn’t have sufficient transportation infrastructure, it doesn’t have sufficient sanitation infrastructure, it doesn’t have sufficient sporting infrastructure, it doesn’t have sufficient telecommunications infrastructure. So there has been an enormous amount of investment that has been required of the city of Rio.”
So much investment that in June, the Brazilian government authorized an $850 million loan for Rio to help pay for Olympic infrastructure and security, after the city declared a state of financial emergency.
But the evidence indicates Rio is unlikely to receive a good return on this heavy spending.
>In other news YOU need to know:
Trump Names Wall Street And Real Estate Titans As Economic Advisers
Donald Trump has released the names of his economic advisers, a list heavy with Wall Street and real estate industry figures, but short of actual economists.
The names include several people from the world of hedge fund and private equity firms, including Steven Feinberg, chief executive and co-founder of Cerberus Capital Management; Thomas J. Barrack, chief executive of Colony Capital Management; and John Paulson, president of a hedge fund company bearing his name.
One major oil industry executive is on the list: Harold Hamm, CEO of Continental Resources, who made a fortune in Bakken Shale formation and is said by Forbes to be worth almost $13 billion.
Among the real estate industry executives Trump named are Howard M. Lorber, president and CEO of Vector Group, and Steven Roth, chief executive of Vornado Realty Trust.
Moody’s Says Brexit Vote to Negatively Affect UK Commercial Real Estate Market
* Foresee any negative investment sentiment from Brexit to impact secondary quality property
* Anticipate new UK-EU trade agreement, UK GDP growth of 1.8% in long run, average UK commercial real estate values to decline by up to 10%
* Expects central London office market to suffer greatest initial impact due to large presence of financial and professional service companies
* Brexit vote to negatively affect UK commercial real estate market
Cheap #Mortgages: Party On!
Freddie Mac reports average U.S. fixed mortgage rates declining after nudging slightly higher for three consecutive weeks.
-30-year fixed-rate mortgage (FRM) averaged 3.43 percent with an average 0.5 point for the week ending August 4, 2016, down from last week when it averaged 3.48 percent. A year ago at this time, the 30-year FRM averaged 3.91 percent.
-15-year FRM this week averaged 2.74 percent with an average 0.5 point, down from last week when it averaged 2.78 percent. A year ago at this time, the 15-year FRM averaged 3.13 percent.
-5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.73 percent this week with an average 0.5 point, down from last week when it averaged 2.78 percent. A year ago, the 5-year ARM averaged 2.94 percent.
“Treasury yields fell last week,” says Sean Becketti, chief economist, Freddie Mac. “Borrowers are taking advantage of these low rates by refinancing. The latest Weekly Applications Survey results from the Mortgage Bankers Association show refinance activity up 55 percent since last year.”
The i360, World’s Most ‘Slender’ Tower, Opens in England
It has been billed as “the world’s tallest moving observation tower,” a futuristic 531-foot-high structure that will give visitors an experience that one of its creators likened to floating in a hot-air balloon.
Combining high-tech modernism with a somewhat incongruous Victorian seaside vibe, the tower, British Airways i360, opened on Thursday in the city of Brighton in southern England.
Visitors who pay the general admission fee of 15 pounds, or about $20, can ride about 10 minutes up a slender steel spire in a glass pod to take in sweeping views of the Sussex coastline.
As with many ambitious architectural projects through the ages, praise for the tower has been as thin as the structure itself. The litany of complaints include criticism about its aesthetics — some have compared its shape to that of a sex toy — and accusations that the tower is a monumental and glorified marketing tool.
How Much Does Living Off-Campus Cost? Who Knows?
Location. Location. Location. That adage about real estate pricing takes on new meaning — and some bewildering logic — in the hands of college administrators.
In setting allowances for off-campus living, the Pratt Institute in Brooklyn decided that about $18,500 should cover it. Two blocks away, St. Joseph’s College determined that $10,000 would suffice.
SUNY College at Old Westbury and Long Island University’s Post campus in Brookville, N.Y., may be in similarly affluent locales just five miles apart, but look at the chasm between their budgets for students living off-campus: The State University of New York computed that its students needed $11,300 last year, while L.I.U.’s needed $27,500.
This is not just a New York state of mind. Estimating expenses is a murky business across the country, made even more so when “miscellaneous expenses” — for anything from health insurance to laundry — are added to the equation.
In Philadelphia, the University of Pennsylvania and neighboring Drexel University calculated off-campus costs that vary by $3,000. And Johnson & Wales gives students at its campuses in North Miami, Denver, Providence, R.I., and Charlotte, N.C., the exact same allowance: $8,609, though these cities have disparate living costs.
Wisconsin HOPE Lab compared college estimates of off-campus living costs for the 2013-14 academic year with countywide estimates based on government figures for housing (with roommate), food, health care, transportation and miscellaneous expenses. The graphic shows differences among neighboring campuses.
This $11 Million Island Home Is Within Commuting Distance of NYC
Island dwellers the world over have noted rising sea levels with increasing alarm, but for Barrie Zesiger and her husband, Al, the lone inhabitants of Connecticut’s three acre Tavern Island, climate change has resulted in an unexpected if temporary benefit: “Going across the sound at 2 a.m. in the winter isn’t a big deal,” Zesiger said. “It’s easy, because things don’t freeze over anymore.”
It also helps that the trip from island to shore takes about five minutes. Travel is easy enough that the Zesigers, who recently retired from the money management firm they founded, spent more than 35 years commuting to Manhattan. (The island is just off the town of Rowayton, CT which is a little more than an hour’s drive from the city with traffic. The couple also keeps an apartment in New York.) But after her husband fell in a horse riding accident—“we were going to get rid of the horse, but the horse got rid of us first,” she said—they decided to sell the island.
Have a prosperous week ahead!
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