CRE News

December 9th 2024

According to the US Census Bureau, construction spending in October 2024 was estimated at a seasonally adjusted annual rate of $2,174.0 billion, marking a 0.4 percent increase from September. Private construction specifically experienced a notable surge, with spending reaching a seasonally adjusted annual rate of $1,676.4 billion, up by 0.7 percent from the revised estimate for September. Within the realm of private construction, residential spending saw a significant increase of 1.5 percent to $934.0 billion, indicating strong growth in housing development. Meanwhile, private nonresidential construction also contributed to the overall rise, increasing by 0.01 percent to $742.4 billion, maintaining stability in this sector.

December 2nd 2024

CBRE predicts that the holiday retail season in 2024 will see a significant increase in omnichannel strategies, with a focus on Buy Online, Return In-Store (BORIS) to manage the growing volume of online returns. This approach not only cuts down on shipping costs but also improves customer satisfaction by offering convenient return options. The trend reflects a broader shift in consumer behavior, where seamless integration of online and physical shopping experiences is becoming the norm, prompting retailers to adapt their strategies to maintain competitiveness. Additionally, this shift is expected to drive the development of technological solutions aimed at optimizing the return process for both the retailer and the consumer.

November 25th 2024

In 2024, the U.S. commercial real estate market faced challenges from high interest rates, geopolitical issues, and evolving real estate needs, prompting investors to be selective in their investments, particularly favoring multifamily, industrial, and data centers. The office sector struggled with ongoing high vacancies due to remote work trends, while retail showed resilience. Anticipated Federal Reserve rate cuts into 2025 are expected to increase liquidity and transaction volumes, with sectors like multifamily and industrial poised for growth. Distressed properties have attracted buyer interest, and while the market shows signs of recovery, the office sector's challenges persist, with only niche areas like medical offices showing promise.

November 18th 2024

Advance Auto Parts has revealed intentions to close over 700 locations, encompassing its corporate stores, independently-owned outlets, and four distribution centers, as part of a comprehensive strategy to bolster its financial standing. This move is part of a larger wave of store closures across the U.S. as retailers recalibrate in response to economic shifts, evolving consumer trends, and the aftermath of the COVID-19 pandemic. The initiative seeks not only to cut losses but also to optimize the company's business model for future growth and sustainability.

November 11th 2024

Adaptive reuse in the self-storage industry is booming, especially in the Midwest, where developers are transforming old big-box stores and warehouses into storage facilities. This trend capitalizes on the availability of vacant retail spaces, offering economic and environmental benefits by repurposing existing structures. The demand for self-storage drives this development, aligning with changes in consumer behavior, downsizing trends among Baby Boomers, and the lifestyle choices of Millennials. This practice not only reduces construction costs but also promotes sustainability and economic revitalization in local communities.

November 4th 2024

According to the VTS Office Demand Index (VODI), there has been a significant increase in office space demand in tech-driven cities like Seattle, Boston, and San Francisco due to tech companies reevaluating their office space needs and possibly shifting towards policies that encourage office returns. This trend has reversed earlier preferences for remote work, with the demand growth in these cities notably outpacing that in less tech-focused cities like Chicago, Los Angeles, and New York.

October 28th 2024

The RCA CPPI National All-Property Index declined 1.9% in September 2024. Commercial property prices continued to decline, with most sectors experiencing annual losses. Industrial property was the lone exception, posting a modest year-over-year gain. While the pace of decline has slowed for some sectors like apartments and office, the overall trend remains negative. Retail property prices have stabilized, but still show a slight year-over-year decrease.

October 21th 2024

According to CNBC, the commercial real estate market shows early recovery signs following Federal Reserve rate cuts, though progress varies by sector. Office real estate faces ongoing challenges from hybrid work, while multifamily housing performs better due to favorable rental costs versus mortgages. While lower rates help, experts caution they aren't a complete solution. Market sentiment is improving with increased transactions, but significant refinancing needs in coming years suggest an uneven recovery ahead.

October 14th 2024

In 2024, the U.S. industrial property sector is on course to utilize more than 100 million square feet, demonstrating its enduring demand and slight rise in available space. This absorption rate showcases the sector's resilience and continued demand. The market has seen 96 MSF absorbed by the third quarter, with expectations set on surpassing the 100 MSF mark by year's end. Leasing activities remain robust, with 434 MSF recorded in 2024, indicating strong market activity across various regions, particularly in the Northeast and South where rent growth has been significant. However, there's an anticipation of a more significant recovery in 2025 as economic conditions improve and leasing activities are expected to pick up, according to insights from Cushman & Wakefield.

October 7th 2024

A recent survey by the CRE Finance Council shows increased optimism among commercial real estate (CRE) professionals following a Federal Reserve interest rate cut. The Third-Quarter 2024 Sentiment Index surged 18%, reflecting positive expectations for economic conditions, lending, and asset values. Key findings include improved confidence in the U.S. economy, with 85% of respondents expecting lower mortgage rates to boost CRE finance, and 81% anticipating higher investor demand. Borrower demand for financing and liquidity also saw significant gains. However, concerns remain about the office sector, especially for older buildings. Overall, the outlook is positive, with many expecting a recovery in 2025.

September 30th 2024

The Federal Reserve's recent rate cuts are aimed at alleviating stress in the commercial real estate sector, particularly for office spaces affected by post-pandemic work changes. Despite these cuts, experts believe that while they provide some relief by making refinancing more feasible, they are not a complete solution for the sector's challenges, especially with ongoing office market difficulties. The broader economic impact is expected to be mitigated by the U.S. banking system's resilience and available capital, though the sector still faces potentially billions in losses. This situation underscores the limited but helpful role of rate cuts in managing economic stability while not fully resolving the deeper issues within commercial real estate.

September 23rd 2024

The Federal Reserve cut interest rates by 50 basis points to a range of 4.75 to 5.0 percent, marking the first reduction in over two years, in an effort to support economic activity while continuing to manage inflation, which has fallen to 2.5 percent. This move, announced after the Federal Open Markets Committee meeting, reflects a shift in focus towards sustaining the labor market and hints at possible further cuts, despite being close to an election. Fed Chair Jerome Powell emphasized the balance between not easing policy too quickly or too slowly, suggesting a cautious approach towards achieving a neutral policy stance. The rate cut is seen as a positive signal for the commercial real estate market, potentially easing borrowing costs and encouraging investment, although immediate impacts on cap rates and market sentiment might be modest, with more significant effects expected post-election and into the following year.

September 16th 2024

The first half of this year saw a significant increase in the leasing of mega warehouses, those over 1 million square feet, with 31 such deals signed, marking a 35% rise from the previous year, according to CBRE. This surge in leasing activity, driven by new construction, has led to a 2.2% decrease in lease rates for these large facilities, even as rates for warehouses of all sizes rose by 7.7%. The analysis of the 100 largest industrial and logistics leases showed an average lease size increase and highlighted sectors like traditional retail, third-party logistics, e-commerce, and food & beverage as major players. California's Inland Empire, Memphis, and Dallas/Fort Worth emerged as hotspots for these large-scale leases, reflecting ongoing adjustments in the industrial real estate market to absorb the new supply.

September 9th 2024

Delinquency rates for commercial real estate loans in U.S. banks have climbed to 1.4% in the second quarter of 2024, marking the seventh consecutive quarterly increase, as per S&P Global Market Intelligence. This rise reflects ongoing distress in the office market post-pandemic, leading banks to increase their loss reserves and scale back on new CRE lending, with year-over-year loan growth dropping to 2.2%. Banks are managing maturing loans by extending terms or modifying them, with a significant peak in maturities expected in 2027. Despite regulatory concerns and a slight decrease in banks exceeding CRE exposure guidelines, the sector is buffered by stricter pre-pandemic underwriting standards and the presence of alternative financing from private equity. While anticipated Federal Reserve rate cuts might provide some liquidity relief, they are unlikely to significantly alleviate the sector's challenges due to the substantial gap between current and maturing loan rates.

September 3rd 2024

The retail segment within commercial real estate is demonstrating unexpected resilience and growth. According to CoStar’s data, retail has emerged as the most stable category during the recent global health crisis. It enjoys a near-perfect equilibrium between supply and demand, outperforming sectors like office and industrial properties. Retail property valuations have seen a slight increase since 2019, positioning it as the second most valuable sector after multifamily housing. Additionally, retail vacancy rates have decreased, contrasting with the rising vacancy rates in the office sector. Further insights from JLL's second-quarter analysis indicate a significant uptick in retail net absorption, with a notable decrease in the time properties remain on the market before leasing, empowering landlords with greater leverage in rent negotiations. The report highlights a preference for smaller retail spaces, particularly by quick-service restaurants, with regions in the South and Southwest experiencing robust rental growth due to strong consumer demand and demographic expansion.

August 26th 2024

For the third month in a row, consumers have set new records in core retail sales, reaching a 3.4% year-over-year increase in July, even after adjusting for inflation. This broad growth across nine out of ten retail segments marks the first time since August 2022 that such widespread gains have occurred, demonstrating consumer resilience. Online spending saw a significant 6.7% rise, fed by Amazon’s record-breaking Prime Day, while Fourth of July travel led to a 4.1% increase in restaurant sales. Grocery stores also experienced record sales, with vacancy rates dropping to a 20-year low. While retail vacancies have remained stable, upcoming closures from major retailers could open up new opportunities for new and existing businesses to expand into these spaces, which suggests a dynamic shift in the retail landscape.