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Mogul Minute 08/04/2016
August 4 | 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:

Spiking Data Center Demand Driven By Exploding Cloud Services, Digital Content (World Property Journal)

  • The article gives a high level overview of the rise of digital content and cloud services and how they could push demand for data centers. According to JLL’s latest annual North America Data Center Report, they believe “Cloud adoption will double the size of the data center industry over the next five years. This is spurring a development surge across the country, especially in markets like Northern Virginia where 1.13 million square feet is under construction and a further 2.67 million square feet is planned.”

Freddit Mac: The Top Markets of 2017 (Multifamily Executive)

  • Freddie put out its latest mid-year outlook and while they see the sector moderating, there is still some runway left. While cap rates are compressing in the sector, they noted there is still a healthy 400 bps spread from the 10-year Treasury rate. “The spread during the 2000s was in the range of 275 bps, and the long-run spread is 215 bps, going back to the 1960s,” he said. “So as Treasury rates move up, there’s certainly room for cap rate spreads to compress and for prices to stay relatively stable.”
  • They included an interesting chart showing the spread, check out how small the gap was right before the recession. Also of note is the huge jump in the CPPI – which is an index of multifamily commercial property values.

  • While fundamentals are forecasted to continue to surpass historical averages, the large amount of oncoming supply means rent growth will likely decelerate and vacancies will remain low but tick up slightly.
  • Their top 10 markets for rent growth in 2017 are as follows: San Francisco, Oakland, LA, Sacramento, Tacoma, West Palm Beach, Chicago, Portland, Seattle, San Diego.

Developers Search for Alternative Capital Sources (National Real Estate Investor)

  • Good piece on the increased scrutiny in big banks on construction loans. They have pulled back in the sector and when lending they are generally looking to see higher pre-leasing ratios, larger sponsor equity contributions, and underwriting tighter.
  • This has created more opportunity for alternative lenders and small banks to step in such as Bank of Ozarks, Fifth Third Bank, and Terra Capital (lending mezzanine dollars).

Part 3: Investors, Developers, Following Population Growth (National Real Estate Investor)

  • Sentiment survey showing respondent’s responses over the past three years. Notice the momentum of the industrial market and the pullback in hotels:

Whole Foods Breaks Ground on Chicago Distribution Center (Commercial Property Executive)

  • Whole Foods just broke ground on a new 150,000 SF distribution center in the Pullman neighborhood of South Side Chicago. The facility is scheduled to open in early 2018 and will serve as many as 70 Whole Foods across the Midwest and Ontario, Canada.

Office Depot to close 300 stores, pay dividend (MarketWatch)

  • Office Depot already closed 42 stores in Q2 and plans to close another 300 as a result of the fallout from the broken off merger with Staples. They already planned to close 400 stores, so this would bring the total to 700 store closing over a the next few years.
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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