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April 24 | Read Online​

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News and updates follow.

Guest post - story of the week

​Are Commercial Real Estate Values At – Or Near – Bottom? (LinkedIn)

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The good news: According to the latest MSCI report, commercial real estate prices are stabilizing, dropping only 0.2% month-over-month in March, with industrial real estate taking the lead. The key is the pace of decline, slowing for the eighth consecutive month, according to MSCI, with prices falling just 3.0% year-over-year in March.
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A resilient industrial sector: Prices in this sector increased by 0.7% month-over-month, 2.2% over three months, and an impressive 5.7% year-over-year. This resilience suggests a robust demand for industrial spaces, possibly driven by the continued growth of e-commerce and logistics needs.
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A challenged office sector: In contrast, the office sector experienced significant declines, particularly in central business districts (CBDs). Prices here continued their nosedive, falling by 33.2% year-over-year, with a 2.1% drop just in the last month. Suburban office spaces also faced declines but were less severe, suggesting a differential impact possibly influenced by ongoing remote work trends and the reevaluation of space requirements post-pandemic.
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Retail and multifamily: The retail sector showed a slight uptick month-over-month with a 0.1% increase, despite a modest annual decline of 1.2%. Multifamily sectors saw a deceleration in the pace of price declines, which could indicate stabilization in this market segment despite a year-over-year drop of 8.4%.

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​Future outlook: With the Federal Reserve signaling a slow path to rate cuts, financing costs and maturities will likely remain a critical factor affecting property values, levels of distress making its way into the open market, and investor appetite for syndications.

📰the week's highlights

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​ACRES Commercial Realty Corp. to Report Results for First Quarter 2024 (PR Newswire)

The company’s earnings will be released May 1.

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​Pullback in warehouse-building spree keeps vacancy in check (Crain’s)

The share of available warehouse space in the Chicago area inched up during the first quarter to 5.29% from 5.25% at the end of 2023, according to data from real estate services firm Colliers.

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​Blackstone’s Beleaguered Real-Estate Fund Stems Exodus (WSJ)

“We believe commercial real estate is at an inflection point, with real estate values bottoming,” the company said in an April letter to shareholders.

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​Commercial Foreclosures Up 117% Year Over Year (Globe St.)

New York had a total of 61 commercial foreclosures in March 2024, a 5% increase from the prior month and a 65% increase from a year ago. Florida saw increases of 30% and 107%, respectively.

Related:

​U.S. Commercial Foreclosures Increase in March 2024 (ATTOM)

​Commercial real estate foreclosures have spiked 117% over the past year (Business Insider)

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​US regional banks seen booking more commercial property losses, loan sales (Reuters)

U.S. regional banks are expected to set aside more money to cover potential commercial real estate (CRE) losses and sell more property loans as the sector remains under pressure a year after the collapse of Silicon Valley Bank and Signature Bank.

Related:

​Banks’ Commercial Real Estate Risks Are Uneven (Kansas City Fed)

​Smaller banks reveal ripple effects of commercial real estate woes (Marketplace)

​Banks Believe They Are Well-Prepared for Commercial Real Estate Fallout (WSJ))

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​US commercial real estate transaction analysis – Q1 2024 (Altus)

Commercial real estate (CRE) asset values are still adjusting to the higher rate environment, particularly in private markets where the full effect of repricing has not been felt.

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​Blackstone Earnings Rise as Investment Giant Projects Commercial Real Estate Recovery (CoStar)

Blackstone owns $50 billion of data centers globally including facilities under construction with another $50 billion in prospective future development pipeline.

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​Judgment Day: Burned Investors Move To Seize Elie Schwartz's Assets (Bisnow)

Nightingale Properties CEO Elie Schwartz's plan to pay back the crowdfunding investors he allegedly swindled out of more than $50M in quarterly installments has fallen apart after he missed a critical deadline.

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​EquityMultiple Bullish on Industrial Real Estate Sector, Brings Opportunity to Individual Investors (Newswire)

With a projected increase in demand for warehouse and distribution centers driven by e-commerce growth, expect rental growth of 3% annually over the next five years.

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​Marcus: Commercial Real Estate Doom and Gloom is Overblown (Bloomberg)

PGIM’s co-CEO sees buying opportunities, with June 30 as an entry point.

📈Chart of the week

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​Yield curve inversion: Is this time different? (LinkedIn)

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An inverted yield curve: As of April 19, long-term Treasury yields have been lower than short-term yields for 542 days – and counting. It’s the longest period of yield curve inversion on record. Usually, an inverted yield curve cures itself on a much shorter timeline. Past episodes of prolonged inverted yield curves reflected major crises, such as the stagflation days of the early 1980s, or the bubble just before the Global Financial Crisis.

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An atypical cycle: Usually, the Fed takes an eight-month breather between the final rate increase and the first rate cut. This time around, we’re on a 10-month hiatus – the Fed last tightened in July 2023, and has yet to cut. The new mantra is higher for longer.

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An ongoing boom: The Fed and most observers thought the aggressive rate hikes of 2022 and 2023 would push the U.S. economy into a mild recession. Instead, the boom has continued – inflation is running well above 3%, and labor markets are near full employment.

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A completely different outlook: Now, with the Fed’s policy not having the desired effect, there’s a real possibility that the Fed could be forced to raise rates again, some fear.
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​Read the full article here.​

▶️ This week's podcast

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Guest: Irwin Boris, Heritage Capital Group

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Background: Heritage Capital Group is a 3rd generation family office with an extensive history of investing through multiple economic cycles and multiple asset classes including multifamily, having owned over 7,000 units at one time, office, and today, with some $750MM of AUM in industrial real estate of approx. 6 million square feet.

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Irwin explains why the company does not believe in basing investment decisions on the IRR but focuses instead on underwriting investments to prioritize stable, ongoing cash flow while aiming to at least double equity through appreciation during the lifecycle of any deal.

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Highlights: Seeing through the lens of the current market where many sponsors and their investors who were chasing high IRRs are now facing serious cash crises and, in the worst cases, complete loss of invested capital, reinforces Heritage's investment philosophy.

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Why you should watch/listen: Irwin shares his insights into the broader implications of rising interest rates and their impact on the real estate market and he discusses how Heritage’s cautious approach to debt, favoring longer-term fixed debt structures, has helped mitigate the risks associated with macro-economic market volatility.

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This podcast is an essential listen for those interested in gaining a deeper understanding of industrial real estate investment, market trends, and the strategic considerations crucial for successful real estate ventures in any asset class or during any phase of the economic cycle.

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​Watch or listen to the full episode here.​

📰Social and multi-media

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​Reid Bennett on Dealsl Dying 5 (or more) Deaths (LinkedIn)(4/21/2024)

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​Carl Whitaker on When Supply Overhang Comes to an End (LinkedIn)(4/19/2024)
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​Jay Parsons on Why Consumer Confidence is the Single Most Underrated Variable in Housing Demand (LinkedIn)(4/23/2024)
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​Brandon Roth on the Next Fed Meeting (LinkedIn)(4/22/2024)
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​Lawrence Yun on Job Gains Since Pre-COVID Record High Payroll Employment (LinkedIn)(4/22/2024)

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​Why This State Might Be the Multifamily Distress Canary in the Coal Mine (LinkedIn)(4/23/2024)

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​Dave Wald on Overall Multifamily Operating Expenses Rising 7.1% YoY (LinkedIn)(4/22/2024)

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​CRE Analyst on the CRE Hangover (LinkedIn)(4/21/2024)

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​Are you an optimist or a pessimist? (LinkedIn) 4/19/2024)