What is the "Battery Belt?"
Plus 99% mortgages in the UK? Catch up on the weekend in CRE news---->
Hey guys, hope you had a nice weekend. We missed posting yesterday due to “The Church of Football,” aka the NFL playoffs, where we saw our beloved 49ers eke out a victory against a very motivated and talented Green Bay squad.
Today we’re going to offer up double the dose of our typical news stories, covering everything that happened over the weekend that we didn’t cover in our Saturday issue.
These stories should prepare you to be an informed participant in the CRE conversation during the week.
Thanks for reading.
Bonus Video: See 49er’s linebacker Dre Greenlaw dash Green Bay’s Superbowl dreams with a very well-timed interception.
SOUTHEAST'S 'BATTERY BELT' CHARGES UP COMMERCIAL REAL ESTATE BOOM
Commercial Observer recently dropped an excellent read, asking serious questions about the future of the American “battery belt.”
The Southeastern U.S. is electrifying the commercial real estate market with its burgeoning 'Battery Belt'. Home to around half of the nation's EV plant ventures, this region is racing towards a new economic horizon, though infrastructure may be tested by the rapid surge.
🏭 Industrial Surge: Elizabethtown, Ky., once reliant on Fort Knox, now bets on BlueOval SK—an immense battery plant joint venture between Ford and SK On. With two 4 million-square-foot facilities underway, Hardin County anticipates a jobs and building explosion.
Blue Oval SK Campus: Courtesy of SK ON
🌟 Regional Renaissance: The Southeast—Kentucky, Tennessee, South Carolina, Georgia—is a hotbed for roughly 77 EV projects valued at $80 billion, thanks to incentives from the Inflation Reduction Act. This automotive boom accelerates an already thriving industrial landscape.
🏘️ Real Estate Ripple Effect: Right-to-work laws and proactive local leadership are currently amplifying the region's appeal to companies. This is catalyzing a domino effect in commercial real estate demands—from housing to warehouses and retail spaces.
📊 Economic Expansion Metrics: A study predicts that Hyundai's EV plant could spawn 3.7 additional jobs per onsite job in its vicinity. Hardin County alone might need almost 9,000 new housing units for 22,000 newcomers.
💰 Urban Upswing: Major cities like Atlanta and Charlotte will reap benefits from regional growth. Hotspots like Savannah are witnessing a multifamily development boom due to high rental growth forecasts tied to new industrial activity.
⚡ Infrastructure Impact: As plants near completion, they pave the way for further development along strategic corridors. Yet with operational timelines extending over years, developers have a window for strategic planning and securing finances.
🚧 Cautionary Notes: Despite potential prosperity, workforce shortages and electricity demands could slow progress. Outsiders face challenges without local connections, so building relationships is critical.
💸 Incentive Imbalance?: Some observers are raising concerns about hefty subsidies potentially draining resources from public services essential for sustainable community growth.
Links of the Day
🧑🏫️Our Picks
🍔🚨 In-N-Out Outage: Oakland's lone In-N-Out Burger shuts down amid a wave of crime, with over 1,300 incidents including theft and armed robberies near the once-popular eatery. Patrons and staff face an escalating safety crisis.
🤯 UK PM Sunak Proposes 99% Mortgages: UK Treasury debates offering near-total mortgages for newbie homeowners, sparking debate over risks of market overheating vs. helping 'generation rent'.
🌉Renter Rebellion: San Francisco tenants in 65 households strike against Veritas over living conditions.
👤 Rising RE Fraud: Over half of real estate professionals faced seller impersonation attempts last year. With AI in play and more data breaches, experts predict a stormy 2024 for industry fraud unless significant safeguards are implemented.
⚾ 🏢Financial Field: Lerner family's commercial real estate woes echo in Nationals' revenue challenges.
💼 Institutional Insight: 2024 eyes a spike in commercial real estate investment, driven by allocation balancing, rental rate revelations, and shifting interest rates.
🚨Asset Auction Anxiety: Nightingale's Elie Schwartz faces the heat as he sells off holdings, including a West Side condo and NJ mansion, striving to meet a $50M investor repayment plan.
🏗️ NYC's urban transformation: 46 properties join Mayor Adams' Office Conversion Accelerator, aiming to turn vacant offices into over 2,100 homes amidst a push to revitalize city living spaces.
🏭Industrial
💼 Real Estate Power Move: Shareholders green-light Realty Income's massive takeover of Spirit for $9.3B, promising a significant footprint expansion in the commercial property market.
🚗 EV Revolution: Commercial real estate gears up in the Southeast as the 'Battery Belt' attracts $80 billion in EV investments. New jobs and housing are on the horizon, yet concerns over sustainability loom.
👪 Multifamily
🚫 Hidden Fees, Hot Water: Greystar faces a lawsuit in Colorado over undisclosed "junk fees" in rental agreements, sparking statewide legal scrutiny.
🏢 Landlord Labyrinth: Two of California's property giants, WS Communities and Veritas, face a storm of defaults as rising interest rates batter the multifamily sector. Brookfield claims 76 Veritas buildings in foreclosure sweep.
🚧⚖️ Hell’s Kitchen High-Stakes: Georgetown 11th Avenue Owners triumph in court over J.T. Magen's fraudulent scheme, shaking off $11M liens at star-studded 787 11th Ave property.
📉🛠️ Rental relief in sight: U.S. sees negative rent growth and a surge in multifamily construction. A historic high in new units meets economic uncertainty, giving renters more options and leverage in 2024.
🚔⛓️Tenant abuse & fraud: David Merryman, a VA landlord, indicted for racial harassment and defrauding HUD. Allegations include physical assaults on tenants and deceitful property misrepresentations to secure COVID-19 relief funds.
🏷 Retail
🛍️ Retail Reversal: Net lease retail cap rates rise to 6.35%, with drug and dollar stores facing sharp spikes as market braces for potential Fed rate cuts later this year.
💡 Reinvention on the Horizon: With an experiential shift and omnichannel strategies, the retail sector blossomed in 2023. 🚀 High demand met limited space, pushing rents up as retailers navigated construction costs and prepared for a dynamic future.
💼 Office
🚧 Construction Conundrum: As businesses rush back to brick-and-mortar offices, the U.S. sees its lowest construction starts since 2011—heralding a future shortfall in Class A office space despite current discounted sales of trophy buildings.
🏙️ Shanghai Shakeup: BlackRock slashes price for office towers by 30% amid a slump in market, with Shanghai rents hitting a near-decade low, challenging commercial real estate values in China's metropolis.
🔍📈Are building values being artificially inflated? :NYC's SL Green Realty's recent building valuation comes with hidden financial incentives, sparking discussions about the transparency and accuracy of office property values.
🏢 Portland's Office Puzzle: With a striking 16.4% of metro office space empty and downtown vacancies soaring up to 29%, the city faces a sluggish recovery with minimal new projects on the horizon.
🏗️ Reimagining Workspaces: In the wake of persistent remote work trends, St. Louis grapples with soaring office vacancies but finds a silver lining as districts like Clayton adapt with modern amenities and creative space conversions.
🌆 Big Apple Rebuild: With $500 million already pledged, RXR and Ares Management aim to raise another half-billion to revitalize New York City's office real estate landscape, focusing on top-tier class-A assets ripe for rejuvenation.
💲CRE Finance
🏡Buyer's Alert: Rising mortgage rates and inventory hint at a more balanced housing market.
🤝 Negotiations Critical for Brooklyn Landmark: Special servicing steps in as Brookfield's $148M loan for One Pierrepont Plaza reaches maturity without payment. The building, key to MTA operations, hangs in the balance as talks proceed.
🛍Grab Bag
🌐Risk Management Reimagined: LexisNexis introduces Flyreel for commercial properties, leveraging AI for enhanced underwriting precision.
💥 Valuation Vortex: Midtown's Thor-owned landmarks nosedive in worth, now engulfed in a $124M debt quagmire. As foreclosure threats intensify, efforts for a resolution face an uphill battle. 🏢🔨
📊Daily Data Visualization
Retail, office, and industrial all saw cap rate rises in Q4, per the Boulder Group’s Q4 2023 Net Lease Market Report.
CAP RATES RISE FOR 7TH CONSECUTIVE QUARTER
Cap Rate Climbs in Single Tenant Net Lease Sector
The Boulder Group's Q4 2023 Net Lease Market Report unveils that cap rates have risen for the seventh consecutive quarter across retail, office, and industrial sectors. Specifically, retail saw an increase to 6.35%, office to 7.55%, and industrial to 7.00%. These changes reflect ongoing adjustments as asset pricing strives to align with heightened borrowing costs from the past year.
A Widening Gap: Asking vs. Closed Cap Rates
The divide between median asking and closed cap rates has expanded, signaling friction in the market—most pronounced in the office sector with a spread widening by 12 basis points to 67 bps.
Inventory Growth Points to Supply Surplus
The number of properties on the market jumped by 11.6% overall, with retail experiencing a notable surge of 12.7% compared to Q3.
Special Attention on Retail Subsectors
Challenges within drug store and dollar store subsectors have led to above-average cap rate increases due to corporate tenant issues and growing supply—affecting brands like Walgreens and Family Dollar significantly.
Federal Reserve's Next Moves Under Watchful Eyes
Potential interest rate cuts in 2024 could reinvigorate deal-making in the net lease space. All eyes are set on upcoming Federal Reserve meetings for clearer signals about what lies ahead.
That’s all for today, but we’ll be back tomorrow with your daily dose of the commercial real estate stories you need to read. See you soon.
