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#MogulMinute 12/02/2016
December 1 | 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:

US Economy Sees Strong Q3 Expansion (Bisnow)

  • Driven primarily by consumer spending, GDP grew 3.2% on an annualized quarter-over-quarter basis. This is the fastest growing quarter in over two years and was 30 basis points higher than initial reports.
  • This data is in line with the Fed’s expectation that the economy is making slow, steady progress and will likely be coupled with a rate increase in December.

Mobile Looms Larger With Holiday Shoppers (WSJ)

  • Online traffic (109 million people) beat in-store traffic (99 million people) on Black Friday for the second year in a row. Online spending was up 18% year-over-year and tallied $5.27B. “The shift highlights the struggle traditional retailers face as they strive to attract foot traffic into their brick-and-mortar locations with deep promotions, friendly staff and exclusive products, while investing billions to become e-commerce experts to fend off Amazon.com Inc. and attract consumers who are more willing to use their mobile phones to snag deals.”
  • According to Bisnow, mobile sales reached its highest volume ever totaling $1.2B over the 24-hour period, a 33% jump year-over-year.

Pricing Rises In 4 Out Of 5 Sectors (Globe St)

  • Both pricing and transaction volume rose in the third quarter. Four of the five main sectors saw increases in pricing gains led by the office sector with a 3.7% gain for the month. The hotel sector continues to struggle as pricing decreased for the sixth straight month declining 8.5% year-over-year.
  • “With the exception of the hotel sector, it’s been an encouraging month for commercial real estate pricing, thanks to a boost in investor confidence as broad economic indicators continue to point upward,” says Peter Muoio, chief economist at Ten-X. “In particular, pricing in the office and apartment sectors have benefited from continued healthy demand and rent growth, reflecting an economy that is creating jobs and strengthening wages.”
  • Transaction volume increased 2.1% from the prior quarter as apartment activity continues to be strong. Apartment volume was responsible for nearly a third of all transaction volume during the quarter and outperformed its historical average transaction by more than 70%.
  • 2015’s robust deal activity is looking more and more of an outlier as Ten-X believes that deal volume has moderated and this year’s activity is consistent with 2014.

US CMBS Delinquency Report: Delinquency Rate Climbs Back Above 5%, Reaching Highest Level Since December 2015 (Trepp)

  • The delinquency rate increased five basis points month-over-month to 5.03% in November, marking its highest level since December 2015. This marks an increase in the delinquency rate in eight of the past nine months. Earlier this year, the rate hit a multi-year low of 4.15% in February (see the chart below).
  • The rate still has ways to go to reach the heights of the crisis when it was 10.34% in July 2012.  
  • Apartments continue to be the best performing asset type with regards to the delinquency rate at 2.5%. The rest of the property types check in as follows for the month: lodging (3.63%), industrial (5.68%), retail (6.18%), and office (6.57%). 

Competitors VTS and Hightower Merge in $300M Deal (Bisnow)

  • The two real estate tech startups are merging in a $300M, all-stock transaction. The company will retain the VTS name and provide asset management tools for more than $5.5B of commercial space across the US and the UK.
  • Their investor base includes RRE Ventures, Blackstone Group LP, Boston-based venture-capital firm OpenView, Bessemer Venture Partners, Menlo Park, CA and Joshua Kushner-led venture firm Thrive Capital.

Dear Tenant: Your Uber Is Here (WSJ) & Office And Industrial: Buy Or Sell? (Globe St)

  • A couple of mentions for the potential downsize and/or re-use of existing parking lots/structures due to the rise of ridesharing services in CRE:
  • “Developers of shopping malls, stadiums and theme parks, meanwhile, are reimagining their exterior footprints to account for more Uber traffic, playing with new ideas such as widening curbside drop-off areas resembling those found at airports—some with concierges offering beverages—and shrinking parking lot space.”
  • Green Street Advisors estimates parking needs will be cut in half over the next 30 years amid an anticipated decline in vehicle ownership, eliminating the need for 75 billion square feet of parking space.
  • For example, near downtown Los Angeles, new residents at the 41-unit Eleanor Apartments (a Trion owned property) now receive $100 in Uber concessions every month instead of on-site parking spaces.
  • However, Sam Zell is not a believer. “When I was in high school in the ’50s, the projection by the ’90s was that we would all commute to work in our private helicopters. I believe that the focus on driverless cars and all these other things eventually will to some extent occur. But I think anybody making bets on kinetic technological change in private assets will be disappointed.”
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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