Situs Newswatch 9/18/2017

Preserving Value with Multifamily Properties

The Situs RERC 2Q 2017 Real Estate Report, Preserving Value, now available, shows how investors can best position themselves to preserve value over the next year.

Situs RERC surveys hundreds of regional and institutional investors across the nation about investment criteria in their local marketplaces and trends across the country. We present the quarterly survey results along with actionable insights in our report. Here are a few highlights from the multifamily section of the report:

  • Expected rental and expense growth rates for the multifamily sector decreased 10 basis points to 2.8 percent;
  • Required going-in and terminal cap rates decreased 20 basis points to 5.0 percent and 5.4 percent, respectively;
  • The required pre-tax yield rate decreased 20 basis points to 7.0 percent.

The report additionally features insights for the 48 major U.S. markets, analyses for institutional pre-tax yield and going-in and terminal cap rates, property type market recaps and more.

Click here to learn more about the current conditions of the multifamily sector.

Situs wishes to congratulate Brian Montgomery for being nominated last week by President Trump to serve as Assistant Secretary of Housing/Federal Housing Administration (FHA) Commissioner at the U.S. Department of Housing & Urban Development (HUD). Montgomery previously served in the same position from 2005-2009 in the George W. Bush administration. His most recent position is Vice Chairman of The Collingwood Group.
read more: DSNews

Robots Coming for YOUR Bank Job
Vikram Pandit, who ran Citigroup Inc. during the financial crisis, said developments in technology could see some 30 percent of banking jobs disappearing in the next five years.

Artificial intelligence and robotics reduce the need for staff in roles such as back-office functions, Pandit, 60, said Wednesday in an interview with Bloomberg Television’s Haslinda Amin in Singapore. He’s now chief executive officer of Orogen Group, an investment firm that he co-founded last year.

“Everything that happens with artificial intelligence, robotics and natural language — all of that is going to make processes easier,” said Pandit, who was Citigroup’s chief executive officer from 2007 to 2012. “It’s going to change the back office.”

Wall Street’s biggest firms are using technologies including machine learning and cloud computing to automate their operations, forcing many employees to adapt or find new positions. Bank of America Corp.’s Chief Operating Officer Tom Montag said in June the firm will keep cutting costs by finding more ways technology can replace people.

While Pandit’s forecast for job losses is in step with one made by Citigroup last year, his timeline is more aggressive. In a March 2016 report, the lender estimated a 30 percent reduction between 2015 and 2025, mainly due to automation in retail banking. That would see full-time jobs drop by 770,000 in the U.S. and by about 1 million in Europe, Citigroup said.

read more: Bloomberg

Florida Residents Returning Home Stunned by Scope of Destruction
In at least one area of the hard-hit Florida Keys, residents were left facing a new world of devastation, in which boats became lawn ornaments and power tools were needed just to get inside homes.

One resident in the village of Islamorada in the middle Keys found a 42-foot sailboat in her yard.

“We walked around it. We just don’t expect this. This is something you find in the movies when a boat pops up magically in someone’s yard,” said Annamarie Morejon, 52. “I know the boat came from the Atlantic because you can tell where it took out our seawall.”

Patty Purdo was forced to cut open the side of her trailer home with a chain saw to get in.

“I knew I would lose it,” Purdo said of the home.

“We came back to see if there was stuff we could salvage. We cut a doorway in there, took a chain saw and cut that open, so I can salvage a few more things.”

Sharon Noeller, 60, a waitress whose trailer was destroyed, held a cross and cried as she talked.

“There were about 100 trailers here and I am horrified,” she said. “There are just no words for this, I’ve seen people go through this on TV and of course you don’t think you’ll be that person — and overnight you’re that person. It’s devastating and this is a home I created, decorated, and made so beautiful. It was our little oasis to come home to after work every night. I didn’t want to come today but I had to see it for myself.”

George Campbell, 62, captain of the sportfishing boat Snapshot, was philosophical as he surveyed his severely damaged roof.

“This is the price you pay for living in paradise; at least it’s not cold,” he said.

read more NY Post

Getting Them Back to the Mall
Determined to provide experiences that will attract consumers and persuade them to open their wallets, developers are opening more food halls, the food court’s up-and-coming sibling, which are in the midst of a robust expansion.

Unlike food courts made up of fast food chains, food halls typically mix local artisan restaurants, butcher shops and other food-oriented boutiques under one roof. Many celebrate quirkiness versus uniformity, and their ability to draw crowds is particularly appealing to landlords battling the growth of e-commerce and changing shopping habits.

“Food halls are a place where there’s life and there’s buzz,” said David LaPierre, vice chairman of the global retail services team at CBRE, a commercial real estate services firm. “It’s a real social environment where people want to be.”

In Downtown Brooklyn, the DeKalb Market Hall food hall opened recently in the basement of City Point, a retail, entertainment and restaurant project spanning six levels on the former site of the Albee Square Mall.

Traffic for the food hall ramps up primarily in the lunch and dinner hours, and some spills into the rest of the mall, said Christopher Conlon, chief operating officer for City Point’s developer, Acadia Realty Trust, a retail property investor based in Rye, N.Y.

read more: NYT

Mortgage Applications Soar
The lowest interest rates in almost a year drove total mortgage application volume 9.9 percent higher last week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.03 percent from 4.06 percent.

“Overall, mortgage rates continued to decline last week with the 30-year fixed rate decreasing 3 basis points to its lowest level since the 2016 election. Rates have decreased almost 20 basis points since mid-July,” said Joel Kan, an MBA economist.

After declining for weeks, mortgage applications to purchase a home jumped 11 percent for the week and were 7 percent higher than a year ago. Home buying usually ramps up after Labor Day, and there is plenty of pent-up demand from buyers over the summer who ran up against tight inventory. Sellers also tend to list just after the holiday, which marks the unofficial end of summer.

Median U.S. Household Income Up for 2nd Straight Year
Despite eight years of economic growth since a brutal recession, some politicians and economists have worried that many Americans have not felt the benefits of the expansion.

The Census Bureau paints a brighter picture, suggesting that the recovery had shifted into a new phase in recent years and is now distributing its benefits more broadly.

American households saw strong income growth last year, the bureau reported, and the gains stretched across the economic spectrum. A closely watched measure, median household income, jumped for the second straight year, reaching $59,039 — a 3.2 percent increase after inflation.

The bureau also reported that the percentage of Americans living in poverty continued to fall last year, while the share with health insurance continued to increase.

The data may sharpen the political confrontation between President Trump, who is pressing to overhaul the nation’s economic policies, and Democrats, who now have more ammunition to argue that the changes Mr. Trump seeks would mess with success.

read more: NYT

Goldman Turns to Lending
Goldman Sachs, acknowledging that its storied securities-trading business is unlikely to pick up enough to be a key revenue driver, is now looking to the lower-octane business of lending to spur growth.

The New York firm said Tuesday that loans to wealthy clients, companies and consumers would contribute almost half the $5 billion in revenue growth it is projecting by 2020.

The pronouncement represents a growing acceptance on Wall Street, voiced by other executives this week, that trading revenues, which have declined in the past five years, aren’t likely to return to past peaks anytime soon.

Harvey Schwartz, a top lieutenant to Goldman Chief Executive Lloyd Blankfein, said persistently low volatility in financial markets meant that the third quarter would be a “challenging” one in terms of trading.

read more: WSJ

Brexit: UK Faces Labor Shortage
The UK faces a labour market supply “shock” that could speed up automation and outsourcing rather than push up wages for domestic workers, according to a report by Deutsche Bank.

The research, by macro strategist Oliver Harvey and chief economist Mark Wall, pours cold water on the notion that a drop in migration from the European Union after Brexit will boost earnings, which have stagnated for more than a decade.

It is increasingly clear the UK is pivoting toward a major negative supply shock after decades of robust labor force growth. Faced by labour shortages, then, companies can either a) go out of business b) off-shore production or c) improve productivity.

In the first quarter of this year, net migration fell below 250,000 for the first time in three years, according to data from the Office for National Statistics. Labor force data also show that the jobs growth of EU-born workers has fallen from an annualized rate of nearly 300,000 before last year’s Brexit vote to less than 40,000 today.

A separate report from IHS Markit and the Recruitment and Employment Confederation said UK businesses struggled to find available staff in the third quarter.

Some supporters of Brexit have argued that a surplus of overseas workers has kept UK wages low, particularly in low-skilled industries. As foreign workers return home, they argue, earnings are likely to go up.

read more: WSJ City

How Much is He Paying in Brooklyn? … Fuhgeddaboutit!
Actor Matt Damon is in contract to buy a Brooklyn Heights penthouse, according to people with knowledge of the deal.

The apartment, which tops a condominium project known as the Standish on Columbia Heights, was last seeking $16.645 million.

If the deal closes for that price, it would be the priciest residential sale ever to take place in Brooklyn.

read more: WSJ

Have a prosperous day and week ahead.

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