Industrial vacancy rates have shrunk close to 20 percent. Big-box warehouse users and manufacturing companies looking for smaller industrial buildings are finding a real estate market that is tightening. According to a year-end report from CoStar, the vacancies in the industrial sector have dropped from 6.1 percent at the end of Q32013 and from 6.2 percent at the close of Q42013 - a decline of close to 20 percent in less than a year. CoStar’s report estimates the current vacancy level at 5.4 percent. Read the full article here.
NY Multifamily and development sales push investment property transactions to new heights. Robust multifamily and development site sales pushed investment property transactions to new heights in 2013. Brooklyn saw 1,047 transactions comprised of 1,388 properties totaling $4.052 billion in gross consideration in 2013, a 31 percent increase in transactions and 30 percent increase in properties sold compared to 2012. Read the full article here.
CBRE Report: How did 2013 loan originations stack up? With the reemergence of pro forma income underwriting as well as lower debt service coverage and higher loan-to-value ratios in some recently issued commercial loans, some lenders and investors are asking: Have loan origination standards become too aggressive? Highlights of the report include:
- Loans that were aggressively underwritten—those with low debt service coverage and high loan-to-value ratios—comprised a relatively low percentage of loans originated during 2013.
- Only a small percentage of 2013 loans will likely face refinance difficulty, as many risk-averse institutions seemed to uphold relatively high debt yield requirements.
- Many 2013 loans were originated at a point when rents and occupancies were at or near cyclical lows.
- Loans backing properties in markets where cap rates were near record lows and where property values have surpassed pre-recession peaks may face increased refinance risk.
Download the full report here.
REIT expert forecasts major structural changes. GlobeSt.com interviewed Scott Crowe, a global portfolio manager for Resource Real Estate, a New York-based manager of complex real estate assets. Interview highlights include:
- GlobeSt.com: Are you more bullish on the US or Europe right now? Crowe: I think globally, what’s happened is the US has performed better than international markets, and I think the US will continue to be one of the better places to invest. However, one other place I think investors need to look is Europe.
- GlobeSt.com: What sector will be the biggest winner in this cycle? Crowe: We think that the winner in this cycle will be multifamily, particularly multifamily exposure away from major markets. The top 10 metropolitan areas in the US rebounded very quickly following the financial crisis—abnormally so. They normally do recover first, but valuations are back to peak pricing.
- GlobeSt.com: What do you see ahead? Are we in store for big changes? Crowe: A long-term structural change is going to continue in the US where there is a high propensity to rent. The banks are only lending to rich people, and generations X and Y have a high rate of mobility. They don’t want to get saddled with a mortgage.
Read the full interview here.
Greystar Real Estate Partners’ energy management program with NWP outperformed the multifamily market by 43%. NWP Services Corporation announced the release of a joint study covering reduction of utility costs in the mutlifamily sector in cooperation with Greystar Real Estate Partners. The study documents Greystar’s managed utility expense program outperformed utility costs by 43% using NWP’s platform, as compared to the National Apartment Association’s (NAA) “Annual National Survey of Apartment Operating Income and Expense 2012”, published in September 2013. Read the full whitepaper here.
And in conclusion:
The Economist: The world economy will have a bumpy 2014, but recovery is not yet at risk. The Economist published an article in response to some experts approaching the current market with pessimism due to a slower rate of accelearation. The Econmoist views the current economic climate with “guarded optimism” for a variety of reasons including:
- The balance-sheets of American households are strong.
- The stockmarket slide has dented consumer confidence, but investors’ flight from risk has pushed down yields on Treasury bonds, which in turn should lower mortgage rates.
- Fiscal policy is far less of a drag than it was in 2013 and points to solid, above-trend growth of around 3% in 2014.
“The global recovery will be far from healthy: too reliant on America, still at risk from China, and still dependent on the prop of easy monetary policy. In other words, still awfully wobbly.” Read the full article here.
See you next week.