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Mogul Minute 07/27/2016
July 27 | 2016

Here at RealtyMogul.com, we keep our finger on the pulse of all things real estate, from finance to technology and everything in between. We make a point of sharing interesting articles and think pieces among RealtyMogul.com staff to help our team stay abreast of the market, and ahead of the curve.

So we thought, why not share some of these insights with you, our partners?

Got A Minute? Here’s some recommended reading with key points from the content:

Investments That Balance Offense, Defense (Globestreet)

  • A really good interview with Bill Maher, LaSalle’s head of research and strategy for the Americas, on the state of the economy and their investment strategy at this point in the cycle:
    • On the strength of US industrial: “The warehouse market is really the strongest we see—vacancy rates are well below average, and it’s gotten a real boost from e-commerce and e-retailing. Supply has picked up but it hasn’t caught up with demand yet. The other thing we like about it is that it’s a fairly short development time frame, six to 12 months, and compared to buying existing buildings it costs about 25% less to build than to buy a band new, fully leased warehouse.”
    • On office as a risky asset type: “Office is prone to the biggest swings in demand, so there’s kind of a bias against office at this point in the cycle. And the tech markets have had a credible run, driven a lot by so-called unicorns and companies that don’t have profitable business models yet. That’s a concern, and it’s an area where if there were a downturn, there would be a big swing, so that’s an area we’re being cautious about, particularly in the San Francisco Bay area and to a lesser extent in Seattle, where there’s great demand but a big supply pipeline underway.”
    • On looking more at suburban multifamily as supply ramps up in urban cities: “The other thing I would say is that a lot of the new multifamily has been in relatively few urban markets, including San Francisco, Austin, Chicago, Washington, DC and Boston. They’ve had a lot of new supply. So we’re looking more at suburban apartments now. I know there’s a movement back to cities by Millennials, but we think Millennials will start to look more at suburbs, particularly as they start to worry about schools.”
    • Maher also mentioned self-storage, student housing, and medical office as niche asset types they are high on right now as they tend to do better in recessions.

Facebook’s Answer to Silicon Valley Housing Crunch: Build Apartments (WSJ)

  • Facebook is planning to build 1,500 units in Menlo Park as a gesture to drum up city support for its potential expansion of its current campus. The new units would be for the general public and 15% would be reserved for low or middle income families. Facebook has gotten pushback from the city on the impact the expansion would have on the city and is trying to address the lack of housing in the area.

Something’s Gotta Give: New Buildings are too Expensive for Their Target Audience (Bisnow)

  • Good read on the potential overpricing of Class A new multifamily construction for Millennials. Despite rising vacancies and a lack of wage growth, many of these Class A buildings are leasing up fast. Among the reasons:
    • Many late 20’s early 30’s Millennials are still renting and have salaries that can afford the higher rent burden given where they are in their careers.
    • Millennials are doubling up – couples moving in earlier together and sharing one bedrooms and people are much more open to roommates in general.
    • Unit sizes are getting smaller and driving down the total rent.
    • Renters are more willing to spend a higher allocation of their income on rent.

Economy Watch: Unemployment Rates Among the States Mostly Static (Multi-Housing News)

  • Looks like employment is beginning to stabilize as the Bureau of Labor Statistics reported the unemployment rate was flat in 43 states in June. Only South Dakota reported a lower unemployment rate as they continue to be affected by the drop in oil.

Liberty Property Unloads $1B in Office Buildings (Bisnow)

  • The net selloff from REITs continues in 2016 as Liberty will sell ~$1B worth of assets to Workspace Property Trust. The portfolio includes 108 properties over four states including AZ, FL, MN, and PA.

$100M Mixed-Use Development Wins Approval in El Paso (Commercial Property Executive)

  • Shadow Mountain, a brand new mixed use tower is going up in West El Paso that will consist of a luxury hotel, luxury apartments, retail space, and outdoor green space. The $100M is expected to be completed in late 2018 and will bring an additional 900 jobs to the city.

NorCal College Campus to Double Size with $1.3B Project (Commercial Property Executive)

  • There could be some potential future student housing opportunities as UC Merced will take enrollment from 6,700 (now) to about 10,000 students once the expansion is finished. The $1.3B project will add approximately 1.2 million SF of building and facilities adjacent to the existing campus.​
Tim Ednoff Headshot
Written by , Associate - Commercial Equity at RealtyMogul.com

Tim evaluates investment opportunities as well as performs due diligence and writes content for various equity and debt transactions. Outside of the office, Tim is an avid sneaker collector, a passionate health and fitness advocate, and a dedicated podcast enthusiast.

 
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