The first three months of the year boded well for the industrial sector, which remains red-hot, hitting record low vacancies nationally and record net occupancy gains. Below are five key trends investors and commercial real estate players should be aware of within the industry.
National industrial vacancy levels hit 30-year lows this quarter. Vacancies continued to decline across the country by 20 basis points in Q1 to 5.3%. This is 300 basis points below the 10-year historical average of 8.3%, Cushman & Wakefield’s Industrial Market Beat reports.
For more than 50 years the heart and soul of many American communities was not Main Street but rather the big malls outside of town, the places where you could meet friends, have a meal, shop, get a job, or just hang out. The modern mall was a place to behold, a heated and air conditioned behemoth and a world unto itself, a world which has now become much smaller in recent years.
Old and familiar retail names are now downsizing and laying off — think of Radio Shack (closing 552 stores), Wet Seal (173 stores), HHGregg (88 stores), Limited (all 250 stores), BCBG Max Azria (120 stores), Family Christian Stores (240 stores), JC Penney (140 stores), Macy’s (63 stores), Kmart (108 stores), Sears (42 stores), and even retail giant Walmart (154 stores in the US). The situation is so dire that a website exists to track the carnage, DeadMalls.com.
And yet the prospects with malls may not be as dreadful as the headlines suggest.
“It’s a binary situation where strong malls continue to do well and then there are malls that are duds,” Steve Kuritz, managing director at the Kroll Bond Rating Agency, told The Wall Street Journal.
One morning in late 2015, on Sears‘ vast Illinois campus, more than a dozen employees huddled in a videoconference room on a floor dubbed “B6.”
There, two mid-level employees were preparing a presentation for the CEO, Eddie Lampert, when their boss rushed in with some last-minute advice.
On a chart pad he wrote three words.
“He looks at the presenters and says, ‘Do not say these words to that guy,'” according to a former Sears executive who described the meeting to Business Insider. “That guy” meant Lampert, who would soon appear on a giant projector screen at the front of the room, beamed in live from a home office inside a $38 million Florida estate — 1,400 miles away from headquarters.
The pad with the three words was out of sight of Lampert’s video feed. One of the words on it was “consumer.”
The stakes were high. If any of those words were uttered in front of Lampert, the two presenters would “get shredded” by the CEO, whose frequent tirades had fostered a climate of fear among the company’s most senior managers, said another person — this one a former vice president.
The focus in commercial real estate finance is often on big national banks like JP Morgan or big foreign ones like Deutsche Bank, but it would be a mistake to overlook the Southern lender that’s been making waves in the commercial real estate industry, bringing a little bit of the Ozarks to the world of high finance.
Bank of the Ozarks, based in Little Rock, Ark., broke into CrediFi’s ranking of the top 10 New York City lenders in the fourth quarter of 2016 with over $500 million in loan originations and a 3.0 percent market share.
The bank had previously made the list in the first quarter of 2016, ranking as No. 7, with over $400 million in financing and a 2.4 percent share of New York City’s commercial real estate market, but dropped from the top 10 list in the second and third quarters.
CRE Loan Growth Still Strong but Moderates in July as Analysts Sees More “Rationality” Return to the Market
Second quarter bank earnings results and early third quarter lending numbers clearly show U.S.-based banks have tightened their underwriting standards for CRE loans as they face increased scrutiny of their commercial real estate lending from bank examiners.
In fact, loan officers at domestic banks reported that the current standards are tighter now than they have been on average since 2005, according to the latest Senior Loan Officer Opinion Survey from the Federal Reserve.
The tighter underwriting is showing up in shortened interest-only periods and lower loan-to-value (LTV) ratios as well.
It’s a tough time to pick the strongest apartment markets. That’s because the markets with the strongest demand from renters are also the places where developers are the most eager to build new projects. As a result, the strongest and weakest markets so far in 2016 tend to be places where some kind of surprise has upset developers’ calculations—for better or worse.
Strong despite new supply
Rents are growing quickly in a few cities, including Seattle and Nashville, Tenn., despite very high levels of new construction. “The San Francisco Bay Area, Denver and Seattle have easily been the best performing major markets this cycle,” says Jay Denton, vice president with data firm Axiometrics. “Of that group, Seattle is the only one that remains in the upper-tier of rent growth today.”
Read entire post in National Real Estate Investorhere.
(Bloomberg)—American farmers who expanded production using rented land during the commodity boom a few years ago are now struggling to repay loans.
A crop glut has eroded prices and sent profit to a 14-year low, but rents have barely budged and debt levels are the highest in more than three decades, government data show. Bankers are cutting back on loans that aren’t secured by land, so more farmers are tapping into a U.S. Department of Agriculture program designed to be the lender of last resort. And it’s almost out of money.
The USDA’s Farm Service Agency has allocated $140 million a month on average for direct operating loans since Oct. 1, leaving just $129 million in the budget for the remaining four months of the fiscal year. With about 39 percent of U.S. farms operating on rented property, increased government intervention signals lower land values and more consolidation because debt-strapped and younger farmers will be forced to quit, according to farm groups advocating for more financial aid.