Month: June 2024

The Conversation: Exploring the Rapid Growth of Data Centers in Commercial Real Estate

The latest episode of America’s Commercial Real Estate Show delved into an increasingly significant topic within the industry: data centers. The show featured Ermengarde Jabir, PhD., Senior Economist with Moody Analytics, as the guest expert. This episode marked the first time this show has explored data centers, reflecting their burgeoning importance in the commercial real estate sector. Dr. Jabir mentions Alan Turing early in the show; love that. This is an interesting interview.

Understanding the Data Center Boom

The conversation began with a discussion about the size and growth of the data center sector. Historically, data centers were considered a niche market requiring specialized knowledge to develop and operate. However, the sector has seen explosive growth in recent years, driven largely by the expansion of cloud computing and the advent of generative AI (gen AI). This growth is not only evident in the increased demand for data centers but also in the technological advancements and infrastructure developments required to support them.

The Need for Power and Resources

One of the key challenges discussed was the immense power and cooling requirements of data centers. Unlike traditional commercial real estate, data centers are often measured in terms of power capacity rather than square footage. This shift underscores the importance of access to reliable power sources and advanced cooling technologies. The conversation highlighted the trend of data centers seeking alternative power sources, such as solar and nuclear power, to meet their growing energy needs. Additionally, the move towards liquid cooling technologies represents a significant advancement aimed at reducing operating costs and improving efficiency.

Q: What is a data center’s favorite song?
A: I’ve Got The Power

Dr. Jabir notes that the gen AI operations are centered around hyperscale which can range from 2 to 100 megawatts of power capacity. With a single megawatt equivalent to the energy use of 750 to 1000 homes, the upper end of this calculation is the equivalent of the power capacity of as many as 100,000 homes. Taken further, with the average home tending to house 2.5 people, this is equivalent to the residential power consumption of a quarter million people. Bigly power.

Cap Rate Trends and Investment Value

Cap rates for data centers have remained competitive, comparable to those of industrial properties and even multifamily sectors. Despite rising interest rates, data centers have maintained and even appreciated in value, demonstrating their resilience and attractiveness to investors. The cost of building and equipping data centers is substantial, leading to a reliance on long-term leases to ensure stability and return on investment.

Location, Location, Location

The importance of location in the development of data centers cannot be overstated. While proximity to major business centers remains relevant, the need for vast amounts of power and cooling resources is driving data centers to more remote locations. Areas like Northern Virginia, also known as “Data Center Alley,” have become global hubs for data centers due to their advanced infrastructure and availability of power. Interestingly, regions with cooler climates, such as Scandinavia, are also becoming popular due to their natural cooling advantages.

The Future of Data Centers

Looking forward, the demand for data centers shows no signs of slowing. The conversation emphasized that while exponential growth may eventually plateau, the sector is still in a phase of rapid expansion. The continuous advancements in AI and cloud computing will likely keep driving the need for more data centers, pushing the industry to innovate and adapt to new challenges.

Conclusion

The discussion with Dr. Jabir provided a comprehensive overview of the data center sector, highlighting its growth, challenges, and future prospects. For anyone involved in commercial real estate, understanding the dynamics of data centers is becoming increasingly crucial as they continue to shape the landscape of the industry.

This detailed exploration into the world of data centers underscores their growing importance and the factors driving their expansion. As the sector continues to evolve, staying informed about these trends will be essential for anyone involved in commercial real estate.

A Florida Related Personal Note on the Topic

Notably, Hawkins Commercial Realty was involved in the past in working to secure a site for a cryptocurrency mining group with a need for several megawatts of power. In that process, we came to realize just how much power that was, and then further that there appeared to be only a couple of very specific locations in the entire state of Florida that had the power supply infrastructure to support this. That was a couple of years ago, but I doubt that situation has changed dramatically, if at all, since. After all, Florida has its hands full accommodating all the people moving into it from other states!

The post Video: Moody Analytics Senior Economist Ermengarde Jabir, PhD on Data Center Real Estate; Sector Trends, Performance, & Forecast appeared first on Hawkins Commercial Realty.

609 Brickell Set For Hearing Before Historic Preservation Board

A hearing on the 609 Brickell property is scheduled for Miami’s Historic and Environmental Preservation Board on July 2. The First Presbyterian Church and developer 13th Floor Key Church, LLC are requesting an an amendment to the historic designation report for the property. An iconic, 80-story tower is being planned on the property. A staff report notes that the site…

FIU Report Showcases Doral’s Economic Boom And Rising Diversity In Job Market Amidst Housing Challenges

The City of Doral is hitting its stride with significant economic growth outstripping neighboring areas, as detailed in the latest report put forth by the Florida International University’s Metropolitan Center. The Doral Economic Analysis Report 2024 Update, a continuation of the original study from 2017, reveals a city in the throes of development…

$76.81 Million Loan Secured for ‘SoWy’ Mixed-Use Development in Wynwood and Overtown

More Development, an international real estate company based in Miami and Nassau, The Bahamas, has secured a $76.81 million loan for SoWy, an upcoming mixed-use development in Wynwood and Overtown, north of Downtown Miami. The loan was announced by More Development President Whitney Thier and provided by JP Morgan Chase. The nearly eight-acre SoWy…

1,296-Unit Community Proposed for 15780 W. Dixie Highway in North Miami

An affiliate of Miami-based Resia is seeking approval for a multi-family housing development from North Miami City Officials. The North Towne apartments would comprise five, 12-story buildings, offering a grand total of 1,296 residences at full buildout. Per the South Florida Business Journal, the one-bedroom to three-bedroom units would span 626 to 1,041 square feet…

81-story Brickell Dolce & Gabbana tower advances

Development of an 81-story tower on Brickell Avenue that has been hyped as a condo-hotel with Dolce & Gabbana branding won first-step zoning approval from Miami-Dade County last week by an 11-0 vote. A final review has yet to be scheduled. Currently on the half-acre site is a seven-story office building built in 1972. This is at least the fourth project that aimed to replace that…

Eichner’s Continuum pays $75M for Shuckers site in North Bay Village

Ian Bruce Eichner’s Continuum Company acquired the popular Shuckers Waterfront Bar & Grill property and the adjacent Best Western in North Bay Village. Continuum paid $75 million for the restaurant and hotel at 1819 79th Street Causeway, according to a press release. The firm financed the deal with a $67.5 million loan from Longline Financial. Montreal-based Jesta Group…

Continuum Co. Grows North Bay Village Holdings With $75M Acquisition

Ian Bruce Eichner’s Continuum Co. has added to its property holdings in Miami’s North Bay Village with the purchase of the 2.3-acre site of Shuckers Waterfront Bar & Grille and a Best Western hotel. Continuum paid $75M for the site, Eichner told Bisnow, acquiring it from Canadian investment firm Jesta Group. Continuum landed a $67.5M acquisition and pre-construction loan…

Plans revealed: Three more Live Local Act apartment towers proposed in Wynwood

Developers are seizing on the Live Local Act with plans for five apartment high-rise projects in Wynwood. The towers, which would range from 18 to 48 stories, promise to alter the look of the Miami neighborhood, where heights for years have been capped at 12 stories. Three of the proposals were recently revealed. New York-based Hidrock Properties plans a 39-story, 336-unit…

Raanan Katz plans 1,050-unit project at Miami Sears, amid surge of Live Local Act proposals

RK Centers plans a 1,050-unit Live Local Act complex on the site of a Sears in Miami, amid an outpouring of project proposals under the state’s affordable housing legislation. The firm, founded and led by Miami Heat minority owner Raanan Katz, wants to build three eight-story buildings with 995 apartments and 55 rental townhouses on an 8.1-acre site at 3655 Southwest 22nd St…

Metromover system overhaul gains funding

County commissioners last week unanimously passed a resolution adding $6.7 million to a contract to support the Metromover comprehensive wayside system overhaul project. The additional funds bring the contract to more than $14 million. The contract with New York-based Atkins North America Inc. is for construction, engineering, and inspection services. It passed…

Transformative Miami Riverbridge downtown wins backing

The major redevelopment of one of Miami’s highest profile sites in the heart of downtown is one step closer to reality. A city review board on June 20 unanimously recommended approval of the Miami Riverbridge project, which will take the place of the James L. Knight Center and Hyatt Regency hotel on the Miami River. The Urban Development Review Board did ask…

Miami Riverbridge Approved By UDRB, Including Supertower

The three-tower Miami Riverbridge megaproject was approved last week by the Urban Development Review Board. An existing Hyatt Regency will be demolished to make way for the new towers, one of which will be a new Hyatt Regency. Hyatt is partnering with Gencom on the development. Phase one will include an include an 87-story, 1,046 f00t supertall residential tower…

Miami Riverbridge Gains Unanimous Approval from City of Miami Urban Development Review Board

The redevelopment plans for Downtown Miami’s Hyatt Regency site have received unanimous approval from the City of Miami Urban Development Review Board. The updated project plans for Miami Riverbridge, presented by Hyatt Hotels Corporation and Miami’s Gencom under HRM Owner, LLC, were approved without any conditions at the board hearing. Construction…

“Aggressive pricing”: Brickell landlords list sites at record asking prices

Elevated interest rates and skyrocketing insurance premiums have curbed South Florida’s commercial investment sales flurry of recent years, with cash flow and debt woes besetting some property owners. Yet, Brickell landlords remain unfazed. Since last fall, four large properties have hit the market, and two are for unprecedented prices that would surpass records set during the…

Matther Rieger: Housing Trust Group CEO builds vital affordable housing

Since taking on the role as president and CEO of the Housing Trust Group (HTG), Matthew Rieger has been an advocate and top developer in solving the affordable housing crisis in South Florida. For the past 13 years, Mr. Rieger has led HTG’s advances on affordable housing causes and delivering high-quality housing solutions to underserved communities. Since its inception…

Baha Mar developer scores $77M loan for 8-acre Wynwood assemblage

The original developer of Baha Mar in the Bahamas secured a $76.8 million loan, with plans to build on eight acres of land in Miami’s Wynwood neighborhood. Miami and Bahamas-based More Development spent $115 million-plus assembling six blocks in south Wynwood between 2018 and 2022 where it plans a mixed-use project, said Whitney Thier, president of the firm.

Miami’s First Supertall Tower – Waldorf Astoria Miami – Begins Vertical Construction

The 1,049-foot Waldorf Astoria Miami has commenced vertical construction, new photos show. The Waldorf will be Miami’s first supertall, and the tallest residential building south of New York. It will include 387 condos and 205 guestrooms and suites. The residential component is already 90 percent sold. A record-breaking foundation pour was recently completed…

616-Unit Atlantic Station Tower in Overtown Appears To Have Reached Top Off

Contractors appear to have reached the roof level of the Atlantic Station tower under construction in Overtown, a new photo shows. Groundbreaking for Atlantic Station took place in January 2023. At the time, it was billed as the largest single phase mixed-income Transit-Oriented Development to ever get underway in Miami-Dade County. Atlantic Station is planned…

MSC Group buys future HQ space at Michael Swerdlow’s Block 55 in Overtown

MSC Group is anchoring its new North America cruise headquarters at Michael Swerdlow’s Block 55 at Sawyer’s Walk after paying $67 million for a commercial unit at the Overtown mixed-use project. An affiliate of MSC Group, an international shipping company based in Geneva, Switzerland, purchased a 131,129-square-foot office space on the 7th floor of Block 55 at 249 Northwest…

Corebridge buying Moishe Mana-leased Miami Gardens warehouse, as South Florida industrial deals flow

Corebridge Financial is buying a Miami Gardens warehouse for $25.5 million that is fully leased to Moishe Mana, as South Florida industrial investment sales continue to flow despite elevated interest rates. Lightstone and Mavik Capital Management, both based in New York, are under contract to sell the 134,000-square-foot facility at 15801 Northwest 49th Avenue to Corebridge…

JPMorganChase Expanding Brickell Offices For 400 More Employees

JPMorganChase has announced plans to double the size of its offices in Brickell. The company already has 500 employees in its Brickell offices. With the expansion, the company will have capacity for 400 new employees. The size of the JPMorganChase Brickell office space will go from 80,000 square feet to 160,000 square feet. In addition to offices, there will also be new event…

JPMorganChase Goes Double in Miami

JPMorganChase is planning to double its downtown Miami office footprint at 1450 Brickell to 160,000 square feet, up from 80,000 square feet over the next two years, as well as expand its physical presence in other parts of Florida. JPMorganChase’s major expansion will include other South Florida locations, in addition to the 1450 Brickell office tower seen here.

‘Spectacular’ Tower Planned Across From Brightline’s MiamiCentral

A new downtown Miami transit-oriented residential tower has been announced, with a “spectacular” design. The 700,000-square-foot tower will be known as First & Fifth, and is being developed by Oak Row Equities. It will be located across from Brightline’s MiamiCentral, on a property with a rare perfect transit score of 100. The 45-story tower is being designed…

Foundation Permit Issued At Miami Freedom Park Soccer Stadium Site

A phased foundation permit has been issued at the Miami Freedom Park construction site, according to Miami Building Department records. The phased foundation permit was issued by Miami’s Building Department on June 5 to contractor Lemartec Corporation. Activity can already be seen at the site. Miami Freedom Park will eventually include a 25,000-seat multi-purpose…

Sale of 352-Unit AMLI Doral Multifamily Community in Doral Arranged

JLL Capital Markets has arranged the sale of AMLI Doral, a 352-unit multifamily community located at 11481 N.W. 41st Street in Doral, about 18 miles west of Miami. AMLI Residential sold the property to Pantzer Properties for an undisclosed price. Developed in 2013, AMLI Doral comprises nine four-story buildings with apartments in one-, two- and three-bedroom layouts…

Pantzer continues multifamily buying binge, pays $139M for Doral complex

Pantzer Properties is bullish on South Florida multifamily, acquiring a Doral rental community less than four months after buying a West Palm Beach apartment complex. In what is now the second largest multifamily deal in the tri-county region this year, New York-based Pantzer paid $139.2 million for AMLI Doral, a 6.4-acre garden-style complex at 11481 Northwest 41st Street…

10-Story ‘Ella Miami Beach’ Set for 6940 Abbott Ave in Miami Beach

Yesterday, Florida YIMBY reported on 299 Minorca, an eight-story, mixed-use venture spearheaded by Constellation Group and Boschetti Group. Today, we’re reporting on another venture in the developers’ pipeline: Ella Miami Beach, a 10-story residential tower offering 95 condos. This is not to be confused with ELLE Residences Miami, a taller, separate venture…

Waldorf Astoria Hotel & Residences Secures Record-Breaking Construction Loan and Reaches Major Milestone in Downtown Miami

The Waldorf Astoria Hotel & Residences, a nearly 100-story luxury tower set to rise at 300 Biscayne Boulevard in Downtown Miami, has secured a historic $668 million construction loan, the largest ever for a residential condominium development in Florida. The project, developed by PMG, Greybrook, Mohari Hospitality, S2 Development, and Hilton, achieved this financing…

Developers Propose 57-Condo ‘299 Minorca’ for 299 Minorca Avenue in Coral Gables

Two developers have proposed an eight-story mixed-use venture in Coral Gables. The prospective tower, dubbed “299 Minorca,” would comprise 58,572 square feet of new construction, occupying a 10,341-square-foot site that serves as a surface parking lot. If approved by city officials on June 28th, the project would offer 57 condos intended for short-term rentals, with the homes…

Ellen Buckley gears up development firm following nearly a decade at Terra

During her nearly decade run at Terra, Ellen Buckley managed $6 billion in South Florida real estate projects from concept to final design. But after rising in the ranks to vice president overseeing development at David Martin’s Coconut Grove-based firm, Buckley found no more room to grow professionally. So last year, the 44-year-old developer left Terra to start her own firm…

Miami Seaquarium hit with eviction lawsuit

After nearly 70 years in Virginia Key, Miami Seaquarium is a step closer to getting the boot from its longtime home. Miami-Dade County on Tuesday filed an eviction lawsuit against the affiliate of Miami-based Dolphin Company that owns the landmark marine mammal attraction at 4400 Rickenbacker Causeway. Under the direction of Miami-Dade Mayor Daniella Levine Cava…

Lease roundup: Dacra lands six tenants in Miami Design District, Kushner scores bakery in Edgewater

Dacra scored six tenants at its Miami Design District development. Dacra leased out 90,000 square feet at The Moore mixed-use building at 4040 Northeast Second Avenue, for offices, a private members club, a gallery and a 13-key boutique hotel and the Elastika restaurant, according to a Miami Design District news release. Also, Italian luxury fashion brand Brunello Cucinelli…

Plans Submitted for Grove Village Bimini Block Project in Coconut Grove

Grove Bimini Nassau QOZB, LLC, managed by Sankesh Abbhi of Miami-based private equity firm Abbhi Capital, has submitted plans for the Grove Village Bimini Block Project to the City of Miami’s Urban Development Review Board (UDRB). The proposed project, encompassing the addresses 3410 and 3428 Hibiscus St, 3509/3521/3547/3551/3559/3575 and 3587 Thomas…

City to Consider Plans for ‘the Mosaic at Douglas Road’ at 3700 SW 28th Street in Miami

Today, Miami’s Urban Development Review Board will review plans for an eight-story residential housing complex west of Douglas Park. If brought to fruition, the Mosaic at Douglas Road would comprise just over 268,500 square feet of new construction, offering 130 studio to three-bedroom layout plans. Square footage ranges from 568 to 1,319 square feet, and there would be 210…

Coral Gables office loan enters special servicing

The $71.6 million loan on the Columbus Center office complex in Coral Gables entered special servicing, according to data from Morningstar Credit. The troubled loan is the latest sign that South Florida real estate is feeling the sting from elevated interest rates and other economic headwinds. Although the industry has cited the tri-county regional office market’s resilience…

Total Demolition Permit Issued For One Bayfront Plaza Supertall Site

Miami’s Building Department issued a total demolition permit for the One Bayfront Plaza site yesterday. The permit was approved on March 27. It remained approved but unissued until June 25.. A 19-story office building occupying a full city block in the heart of downtown Miami is being demolished to make way for a supertall tower. Demolition is estimated to take…

PortMiami Among The First In The World With Shore Power

Miami will see a significant reduction in pollution after Shore Power was launched earlier this month at PortMiami. Miami-Dade County Mayor Daniella Levine Cava said Miami was the first port on the eastern seaboard with the system, and one of only 35 in the world. Cruise ships docked at PortMiami no longer have to leave their engines running while in port, instead connecting…

The Weekly Dirt: Examining aspirational pricing in South Florida

Commercial landlords in Brickell are seeking record prices for their properties despite significant economic headwinds. While no one is immune to high interest rates and skyrocketing insurance premiums, multifamily and office owners are having a rockier time. Still, some are betting on the market coming back soon, especially in Miami’s Brickell Financial District, where four…

Miami-Dade Quits $160M Deal to Buy 80-Acre Office Campus

Miami-Dade County has notified the owner of an 80-acre Assurant office complex near Cutler Bay that it is backing out of a $160 million deal to buy the property and transform it into a new South Dade Government Center. A broker representing the campus’s owner, American Bankers Life Assurance — an insurance company that operates as Assurant — received a letter…

Revised Plans for Oceanfront Redevelopment in Hollywood Adds More Residential Units Under Florida’s Live Local Act

Condra Property Group has updated its redevelopment plans for a group of oceanfront hotels, adding more residential units under Florida’s Live Local Act. The New York-based developer, led by Allen Konstam, will present the revised application to Hollywood’s Technical Advisory Committee on July 1. The project concerns 3.33 acres at 2007 and 2115 N. Ocean Drive…

Pine Tree plants roots in South Florida retail with $70M Plantation purchase

Pine Tree made its first foray into South Florida by acquiring a Plantation shopping center at $2.5 million below the previous sale price two decades ago. An affiliate of Northbrook, Illinois-based Pine Tree paid $70 million for The Fountains at 801, 805 and 821 South University Drive, records show. The deal breaks down to $160 per square foot for the 438,051-square-foot…

Mesirow drops $89M for Sunrise apartment complex, amid recent uptick in multifamily investment sales

Mesirow picked up a 325-unit apartment complex for $89.4 million near Sawgrass Mills mall in Sunrise, amid a recent uptick in South Florida multifamily investment sales. The firm bought The Retreat at Sawgrass Village, consisting of a five-story building and three one-story buildings, at 3001 Northwest 130th Terrace from AMLI Residential, according to records and real estate…

Revised Plans For The Arcadian In Fort Lauderdale Seek Site Plan Amendment

A Site Plan Level II has been filed for review, seeking a Site Plan Amendment with design deviation requests to increase the building floorplate and reduce tower stepbacks for The Arcadian, an 8-story mixed-use development set on a 3.35-acre site at 640 Northwest 7th Avenue in Fort Lauderdale’s Progresso Village neighborhood. This amendment aims to add 22 additional…

Fraudster’s Fort Lauderdale Airport Hangar And Luxury Apartment Go Up For Sale

A private hangar and office at Fort Lauderdale Executive Airport is up for sale as their owner liquidates assets to pay two fraud judgments totaling $124M. The FXE Gateway Complex at 1200 and 1400 NW 62nd Street has direct runway access, with a 20K SF office and 18K SF private hangar that can accommodate four planes, according to a release. The buyer will also get a luxury two…

Ex-NFLer Jonathan Vilma proposes 102-unit affordable housing project on Palm Beach County church site

Super Bowl winner Jonathan Vilma proposes a 102-unit affordable housing project on a church site in Palm Beach County, marking continued redevelopment of South Florida’s religious properties. Vilma, who also is a former University of Miami football star, partnered with the West Palm Beach Seventh Day Baptist Church to request changes in the development regulations…

Dalfen Industrial lightens Palm Beach County portfolio with $55M sale

Dalfen Industrial lightened its load in Palm Beach County by selling one of its warehouse facilities for $55 million. An affiliate of Irvine, California-based LBA Logistics bought Interstate Park Logistics Center at 3774 Interstate Park Road North in Riviera Beach, records and real estate database Vizzda show. The deal breaks down to $232 per square foot for the 236,554-square-foot…

Retail Sales Miss Expectations While the Industrial Sector Moves Towards a More Balanced Equilibrium

Highlights: Retail sales were weaker-than-expected in May, increasing by 0.1% MoM (Est: 0.3%) while April’s previously reported flat change was revised lower to -0.2%.Excluding gasoline stations, however, retail sales were higher by 0.3% MoM. Falling gasoline prices have weakened growth with sales at gasoline stations lower by -2.2% during the month.Over the first five…

Moody’s and Zillow team up to enhance data and analytics for multifamily owners and investors

This new, strategic collaboration will leverage more comprehensive rental market data and insights Moody’s, the leading source of insights on exponential risk and global provider of commercial real estate (CRE) solutions and data, and Zillow, the most-visited online real estate marketplace, announced today a mutually advantageous collaboration to enrich the data…

Bank Delinquency Rates Eke Up, Negative Pressure from High Interest Rates to Continue

The June 2024 FOMC meeting came to a close last week and left the CRE industry waiting for a clear signal of loosening monetary policy. Lower interest rates could lessen the negative pressure on property values and net income, lending and transaction volume, and loan delinquency rates. The radical jump in interest rates roiled the CRE capital markets since 2022…

Freddie Mac apartment investment index jumps nearly 9% in first quarter

Freddie Mac’s Multifamily Apartment Investment Market Index (AIMI) increased 8.7% quarterly during 2024’s first quarter, bouncing back sharply from the deep decline in the previous three-month period. The AIMI’s quarter-over-quarter pick-up was broad-based, with all 25 regional markets tracked by Freddie Mac seeing a rise in the index. Annually, the index is up 8.1%…

Starwood Fund’s Liquidity Issues Spark Spike In Withdrawals At Other REITs

Nine of the 10 largest nontraded real estate investment trusts have seen a huge jump in investors seeking to pull out their money following Starwood Real Estate Income Trust’s move last month to sharply limit redemptions. Investors in these semiliquid funds have been looking to withdraw their money since late 2022 as interest rates were spiking, leading many of the nontraded…

Chart: Yield Curve Remains Inverted as Recession-Predicting Power is Debated

A recession can significantly impact the commercial real estate (CRE) sector, often resulting in decreased demand for office, retail, and industrial spaces. During economic downturns, businesses tend to cut costs, which can lead to downsizing or closures. This contraction reduces the need for office spaces, leading to higher vacancy rates and putting downward pressure on rental…

KKR Makes Its Biggest Foray Into Apartments, Betting on Rising Rents

KKR has completed its largest-ever purchase of apartment buildings, the latest in a string of big-ticket deals, signaling that some of the most prominent investment firms are betting on a broad rebound for multifamily housing. The New York-based private-equity firm paid $2.1 billion for more than 5,200 apartment units across the country, from California and Texas to New Jersey…

8% Of U.S. Office Buildings Are Taking Basically All The Tenant Activity

Only 8% of office buildings are thriving, while most of the market has been struggling since the onset of the pandemic. A CBRE analysis of 57 U.S. office markets found that only a sliver of office properties are successful in attracting tenants today, a sharp acceleration of the flight-to-quality trend. This upper echelon is designated as prime office buildings by CBRE, a more exclusive…

JP Morgan’s 2024 midyear multifamily market update

The outlook for multifamily real estate continues to be largely positive for the rest of 2024, even as interest rates remain high. Nationwide, asking rents are expected to grow 2% this year, with vacancies remaining at 5.6%, according to data from Moody’s CRE. But real estate is a local game. Our experts shared multifamily trends, forecasts and opportunities to keep an eye on in top apartment…

The post Miami Commercial Real Estate News June 26, 2024: Miami Riverbridge Dev Gets UDRB Approval; 352-Unit Doral MF Trades for $139M, Miami Gardens Warehouse for $25.5M; More… appeared first on Hawkins Commercial Realty.

Understanding the Yield Curve

The yield curve is a graphical representation of interest rates on debts for a range of maturities. Typically, it compares the yields on short-term and long-term Treasury securities. The most commonly analyzed yield curve is the difference between the 10-year Treasury note and the 2-year Treasury note, often referred to as the 10-year minus 2-year yield spread. The yield curve chart at the top of this post is for the period from June 1976 to June 2024.

In normal economic conditions, the yield curve is upward sloping, meaning long-term interest rates are higher than short-term rates. This configuration reflects investor expectations of future growth and inflation. However, the yield curve can sometimes invert, with short-term rates exceeding long-term rates. An inverted yield curve has historically been a reliable predictor of recessions.

Yield Curve as a Recession Indicator

The yield curve’s predictive power lies in its reflection of investor sentiment. When the curve inverts, it indicates that investors expect slower economic growth or even a contraction. This sentiment often leads to reduced borrowing and spending, which can trigger a recession.

Historically, an inverted yield curve has preceded every U.S. recession since the 1950s, though the lead time can vary. This is visually evident in the chart above, with grey-shaded recession periods following yield curve inversions. For instance, the yield curve inverted in late 2005, two years before the Great Recession began in December 2007. Similarly, it inverted in 2019, before the COVID-19 induced recession of 2020. Despite these precedents, it’s essential to note that not every inversion immediately leads to a recession, and other economic factors also play significant roles.

Recent Trends in the Yield Curve

In recent years, the yield curve has shown some concerning trends. For instance, it inverted briefly in 2019, causing widespread discussion among economists and investors. This inversion occurred amid trade tensions between the U.S. and China and concerns over global economic growth. The recession that followed in 2020 was primarily due to the COVID-19 pandemic, highlighting that while the yield curve inversion was a warning signal, it wasn’t the sole cause.

Post-pandemic, the yield curve steepened significantly as the Federal Reserve implemented aggressive monetary policies to support the economy. However, as inflation surged in 2021 and 2022, the Federal Reserve began raising interest rates to curb price pressures. This tightening cycle led to another inversion of the yield curve in late 2022 and early 2023, reigniting debates about the likelihood of a recession.

What the Current Yield Curve Indicates

As of mid-2024, the yield curve remains inverted. The 10-year Treasury yield is lower than the 2-year yield, signaling that investors might be expecting an economic slowdown or a potential recession. This inversion comes amidst ongoing concerns about inflation, geopolitical tensions, and the impacts of tighter monetary policies.

However, some argue that the yield curve’s predictive power may be less reliable in the current context. Factors such as unprecedented monetary interventions by central banks, changes in global investment flows, and structural shifts in the economy could be influencing the yield curve differently than in the past. Navigating today’s economic landscape is akin to steering a ship through uncharted waters; what once worked in a familiar river may not apply to the vast and unpredictable ocean we now face. The past couple of years have been unique, to put it lightly, and that may matter. Just as you wouldn’t use a driver for a chip shot in golf, traditional indicators like the yield curve might need to be reevaluated or supplemented with new tools in this evolving economic environment.

Potential Impacts of a Recession on Commercial Real Estate

A recession can significantly impact the commercial real estate (CRE) sector, often resulting in decreased demand for office, retail, and industrial spaces. During economic downturns, businesses tend to cut costs, which can lead to downsizing or closures. This contraction reduces the need for office spaces, leading to higher vacancy rates and putting downward pressure on rental prices. Landlords may struggle to find tenants, and existing tenants might renegotiate lease terms or seek rent reductions.

Miami, known for its dynamic and diverse economy, might face unique challenges and opportunities in such a scenario. The city’s strong ties to international business and tourism could cushion some of the blow, as global companies and tourists continue to see Miami as a key destination. However, if a recession were to severely impact travel and global trade, Miami’s office spaces could see higher vacancy rates similar to other major cities.

Retail real estate is particularly vulnerable during recessions. Reduced consumer spending can lead to lower sales for retailers, forcing some to close stores or declare bankruptcy. This decline in retail activity can create vacant spaces in shopping centers and malls, further exacerbating the financial strain on property owners. The rise of e-commerce, accelerated by the pandemic, has already challenged traditional retail spaces, and a recession could intensify these challenges.

In Miami, the retail sector’s resilience may hinge on its appeal as a tourism hub. High foot traffic from tourists can help sustain retail activity even when local consumer spending declines. Yet, if a recession leads to a significant drop in tourism, Miami’s retail spaces could suffer similarly to those in other regions. The city’s luxury retail market, which caters to affluent visitors and residents, might also experience shifts in demand, potentially mitigating some negative impacts or exacerbating them depending on economic conditions.

Industrial real estate, including warehouses and distribution centers, might be less impacted compared to office and retail spaces. However, a recession can still affect this sector by slowing down manufacturing activities and reducing demand for storage and logistics facilities. While e-commerce has boosted demand for industrial spaces, a prolonged economic downturn could lead to a decrease in overall consumer demand, indirectly affecting the industrial real estate market.

Miami’s industrial sector could benefit from its strategic location as a gateway to Latin America and its robust port facilities. Despite a potential recession, the city’s role in international trade and logistics might sustain demand for industrial spaces. However, any significant disruption in global trade patterns or consumer demand could still negatively impact this sector.

Investment in commercial real estate might also see a downturn during a recession. Investors tend to be more risk-averse in uncertain economic times, leading to reduced capital flows into the CRE market. Property values may decline as a result of lower demand and higher vacancies, which could create opportunities for opportunistic investors but pose challenges for current property owners and developers.

In Miami, real estate investment trends could be influenced by the city’s attractiveness as a long-term investment destination. Its appeal to international investors and its diverse economic base might provide some stability. However, fluctuations in global investment flows and local economic conditions will play a crucial role in determining the extent to which Miami’s commercial real estate sector is impacted by a recession. The city’s proactive approach to development and its reputation as a vibrant urban center might help it weather economic storms better than some other markets, but it is not immune to broader economic forces.

Conclusion

The yield curve, particularly the spread between the 10-year and 2-year Treasury yields, has been a historically reliable indicator of economic recessions. Its current inversion raises valid concerns about future economic growth. However, while it remains a valuable tool for gauging investor sentiment and potential economic trends, it’s essential to consider a broader range of economic indicators and factors in making comprehensive economic forecasts. The current global economic landscape is complex, and while the yield curve suggests caution, it is not a definitive predictor of impending recession on its own.

Related Resources

To muddle it up some more, below is a set of posts that express varied opinions about the current state of the yield curve and what is may predict for the US economy:

• Investopedia: Inverted Yield Curve: Definition, What It Can Tell Investors, and Examples
• US News: Inverted Yield Curve; Is it Still a Recession Indicator?
• Fortune: Understanding the yield curve: Why economists use it to predict recessions
• Federal Reserve Bank of Chicago: Why Does the Yield-Curve Slope Predict Recessions?
• Goldman Sachs: Why this yield curve may not signal a U.S. recession
• Forbes: The Inverted Yield Curve Continues To Flash A Recession Warning
• Marketplace: An inverted yield curve usually signals recession. Is it wrong this time?
• CAIA: Far From Perfect: Inverted Yield Curves Don’t Reliably Predict Recessions or the Direction of the Markets
• AllianceBernstein: Why Today’s Inverted Yield Curve Isn’t Necessarily a Recession Warning

*Federal Reserve Bank of St. Louis, 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity [T10Y2Y], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/T10Y2Y, June 24, 2024.

The post Chart: Yield Curve Remains Inverted as Recession-Predicting Power is Debated appeared first on Hawkins Commercial Realty.

PMG Receives $668M Construction Loan for Waldorf Astoria Hotel & Residences Miami

PMG, a development and investment firm with offices in New York City and Miami, has received a $668 million construction loan for the Waldorf Astoria Hotel & Residences Miami. Located at 300 Biscayne Blvd, the building will rise more than 1,000 feet and will house 387 private residences and 205 hotel rooms and suites, as well as retail and restaurant space. The latter component…

PMG, partners score record $668M construction loan for Waldorf Astoria supertall

PMG and its partners secured $668 million in construction financing for the planned Waldorf Astoria Hotel & Residences in downtown Miami, marking the largest ever condo construction loan in Florida. Bank OZK, the most active construction lender in South Florida, and Related Fund Management provided the financing, according to a press release. The 1,049-foot tower…

PMG Secures Biggest Condo Loan in Florida’s History

Property developer PMG has secured a $668 million residential construction loan – the largest in Florida’s history – for its luxury Waldorf Astoria Residences project in Miami. Bank OZK and Related Fund Management are the lenders. The Financial Times, which reported on the transaction, noted that the closest sized deal in the state is a $600 million loan for the…

Miami’s Waldorf Astoria Set to Be Tallest Building in Florida

The Waldorf Astoria Hotel & Residences Miami, set to be the tallest building in Florida and potentially the tallest south of New York City, just broke another record. The developers of the planned 1,049-foot-tall building in downtown Miami recently received a Florida record $668 million condominium construction loan to help build the behemoth structure, which is slated to have…

Foundry, Clarion score $30M construction loan to build Opa-locka industrial project

Foundry Commercial and Clarion Partners are expanding an Opa-locka industrial complex after nabbing $30.1 million in construction financing for two new warehouses. Regions Bank provided the loan to the joint venture, which recently broke ground on two facilities spanning 374,000 square feet on 21.4 acres at Carrie Meek International Business Park, records show.

Terrazul Student Housing at FIU Receives Temporary Certificate of Occupancy

Temporary Certificate of Occupancy (TCO) has been approved for Terrazul, a new student housing development for Florida International University (FIU). Developed by AARE Sunbelt, an affiliate of Adam America Real Estate, and JW Capital Management, the project is located at 700 Southwest 107th Avenue in the University City district. Coastal Construction Group served…

‘The Wyn Mood C’ to Offer 72 Apartments at 107, 121, and 127 N.W. 31st Street in Miami

Miami’s Urban Development Review Board will review plans for a low-rise residential venture: The Wyn Mood C. If given the greenlight, the four-story building would comprise 53,401 square feet of new construction, offering 72 apartments. Twenty percent of the homes (about 14) would be reserved as workforce housing. According to the South Florida Business Journal…

48-story Midtown residential tower Midtown 1 wins OK

A developer is bringing a residential skyscraper to the north end of Midtown in Miami. Terra and Lion Development Group are proposing a 48-story mixed-use tower, Midtown 1, with 400 residential units, more than 26,000 square feet of commercial, and a parking podium for up to 500 vehicles, on a vacant site at 3501 NE First Ave. The city’s Urban Development Review Board…

Cargo master plan jets toward Miami International Airport

Conversations about bringing jet fuel and other alternative fuels to Miami International Airport (MIA) continue as part of a cargo master plan. As Miami Today reported in March, Commissioner Raquel Regalado asked the county to study either bringing aircraft fuel to the airport by train or constructing fuel facilities at the airport that would be accessible by rail. This direction…

Peter Kanavos: Leading efforts to revitalize the east end of Lincoln Road

Peter Kanavos started in import-export and shipping. Based in Athens, Rome and Africa, he worked on four continents before returning to the US and founding Flag Development with his brothers. The company built thousands of residential units on Florida’s West Coast, eventually focusing on luxury hotel and commercial development in Las Vegas, Orlando, Miami and New York.

Oak Row to Develop 500-Unit Miami Community

Oak Row Equities has paid $38.5 million for the development site of First & Fifth, a 500-unit, 45-story luxury community in Miami. The company also structured seller financing supported by in-place income. The previous owner of the 0.8-acre site was The Citadel Arena Corp., according to Yardi Matrix information. Colliers and Pastore & Associates brokered the deal…

Oak Row expands footprint into downtown Miami with planned multifamily project

Oak Row Equities is expanding its development pipeline with plans for a multifamily project in downtown Miami. The New York-and-Miami-based firm is proposing First & Fifth, a 700,000-square-foot building with 500 apartments at 49 Northwest Fifth Street and 50 Northwest 6th Street, according to a press release. In an off-market transaction, Oak Row paid $38.5 million…

Site Acquired for 45-Story Residential Tower ‘First & Fifth’ at 49 NW 5th Street in Downtown Miami

Oak Row Equities has acquired 49 Northwest 5th Street in Downtown Miami, where it plans to develop First & Fifth, a 45-story multifamily tower. The site was purchased off-market for $38.5 million with seller financing and is located across from MiamiCentral Station, the hub for South Florida’s major train systems. The 700,000-square-foot tower is being designed…

Oak Row Buys Downtown Miami Site For $39M With Plans For 500 Luxury Apartments

Oak Row Equities paid $38.5M for a Downtown Miami development site where it is planning a 500-unit, luxury transit-oriented development. The investment and development firm has dubbed its planned high-rise First & Fifth at 49 NW Fifth St., across from the MiamiCentral Brightline station and transit hub. Oak Row, which has offices in Miami and New York…

Flex Capital Group Proposes 22-Story Tower for 1401 N.E. 123rd Street in North Miami

Flex Capital Group hopes to get approval for a 20-story tower in North Miami. The venture would offer 76 apartments, spanning the building’s 14th to 20th floors. The South Florida Business Journal reports that plans also call for 139 hotel rooms, beginning on the eighth floor and ending on the 14th. Our sources indicate that the developer hasn’t yet selected a hotel brand…

Plans Filed for Denbora Bay II and III Multifamily Residential Projects in Miami Beach

The Miami Beach Design Review Board has received filings for two new multifamily residential projects, Denbora Bay II and Denbora Bay III. Both aim to enhance the housing options in the Biscayne Point and Normandy Isles districts, respectively. These projects are being developed by affiliates of Lake Worth-based JF Developers, led by Julian Mancinelli. MUVE Architecture…

New Renderings Revealed for 41st Street Corridor Revitalization Project in Miami Beach

New renderings for the 41st Street Corridor Revitalization Project in Miami Beach have been revealed via a filing with the Miami Beach Design Review Board. The board is scheduled to review the updated proposal on July 2. The plans, initially reviewed last year, have been revised following feedback from the Florida Department of Transportation (FDOT). The Office of Capital…

Sale of Miami Beach Property Paves Way for New Hotel Development on Washington Avenue

Keyah Real Estate Group, led by Xaver Kriechbaum and Gavin Crescenzo, has acquired a mixed-use property in Miami Beach for $20 million with plans to develop a seven-story, 238-key hotel on Washington Avenue. The project, designed by Miami-based Arquitectonica, involves demolishing the existing single-story retail building and a 13-unit apartment building…

FAA Permits Filed For Planned 55-Story Residential Tower ‘Edge House Miami’

Permits have been filed with the Federal Aviation Administration for Edge House Miami, a 55-story tower planned at 1825 Northeast 4th Avenue in Edgewater, Miami. The June 6 filing indicates the tower will rise 637 feet above ground, or 641 feet above sea level. This development, designed by Kobi Karp Architecture & Interior Design and developed by Peru-based Grupo T&C…

750-Foot Cranes Planned At Brickell Construction Site for St. Regis Residences

Plans were submitted to the FAA on June 3 for two cranes at a Brickell construction site. The cranes are to be installed at the St. Regis Residences property on Brickell Avenue. Two cranes are each planned to rise 741 feet above ground, or 750 feet above sea level, the filing states. Earlier this year, Miami’s Building Department issued a total demolition permit to clear a 17-story…

New 41st Street Design Submitted For Review In Miami Beach

New renderings have been filed for the 41st Street Corridor Revitalization Project in Miami Beach. The Miami Beach Design Review Board is set for a hearing on the proposal on July 2. The board reviewed plans for the project last year, but they have now been reviewed following comments from FDOT. Here’s a letter from the architect Brooks + Scarpa filed with the submission…

Wynwood Design Review Committee Votes To Recommend Against 48-Story Tower

A proposal for Wynwood’s tallest-ever tower did not receive a favorable recommendation from the Wynwood Design Review Committee at a June 4 meeting, according to The Real Deal. The vote is only a recommendation to city planners, who will ultimately make the final decision. The project will also be reviewed by Miami’s Urban Development Review Board. Member’s…

Edgewater Tower Submitted To FAA, With Plans To Rise 641 Feet

A filing with the Federal Aviation Administration last week shows that a new tower is planned to rise in Edgewater. It is the same site where a developer recently announced plans for Edge House, a condo building allowing short term rentals. According to the June 6 FAA filing, the new tower will rise 637 feet above ground, or 641 feet above sea level. According to an April press…

14th Street Tower Getting Taller, Submitted For Zoning Review

Plans have been formally filed for a tower near the Arsht Center, and it is now taller than initial renderings. According to the June 6 filing requesting zoning approval from Miami-Dade, the tower is now planned to rise 30 stories, or 353 feet. In an April filing by the developer as part of a pre-application meeting request, the tower height was listed at 27 stories, or 319 feet. The number…

Pinnacle lands $50M construction loan for 120-unit apartment building near Cutler Bay, as affordable housing financing keeps flowing

Pinnacle scored a $49.9 million construction loan for a 120-unit affordable housing building near Cutler Bay, as financing for below-market rate rental projects continues to flow. Miami-based Pinnacle will develop the five-story building at 10455 Old Cutler Road in unincorporated Miami-Dade County, according to the developer’s news release. The project, called Old Cutler Village…

Berkadia Arranges $400M Construction Loan for Condo Development on Fisher Island

Berkadia has arranged a $400 million construction loan for the development of The Residences at Six Fisher Island, an ultra-luxury condominium property in Miami-Dade County. The 10-story development will feature 50 for-sale condos and high-end amenities on the northeastern shoreline of Fisher Island, a barrier island east of Miami. Scott Wadler, Michael Basinski…..

JV Secures $400M Construction Loan for Fisher Island Project

The Related Group and partners Teddy Sagi, BH Group and Wanxiang America RE Group have secured a $400 million construction loan from Madison Realty Capital. The debt will back the construction of Residences at Six Fisher Island, which is situated on the northeastern shoreline of Miami’s Fisher Island. The loan replaces an $85 million acquisition loan Madison Realty Capital…

Codina Partners Receives Site Plan Approval for 412-Unit Multifamily Development at Downtown Doral

Codina Partners has received site plan approval for Sevilla, a 412-unit mid-rise apartment community coming to Downtown Doral, a 250-acre mixed-use development in Miami-Dade County. The seven-story project will be situated on a 4.2-acre lot at the corner of N.W. 53rd Street and N.W. 52nd Terrace, a block from University of Miami Health Systems’ (UHealth) new Ambulatory…

Miami Vacation Rentals acquires portions of Coconut Grove’s Hotel Arya

A short-term rental firm and a German entrepreneur teamed up to acquire 19 condo-hotel units, a commercial space and 66 percent of the common areas at Hotel Arya in Miami’s Coconut Grove. Miami Vacation Rentals, led by founder Juan Uribe, and partner Florian Hagenbuch paid a combined $16.2 million in nine separate deals at the 22-story condo-hotel, which is also…

Shvo’s Multibillion-Dollar Plans For Opulence Start To Show Cracks

Michael Shvo has built his brand on exorbitant luxury. So much so that he is reportedly struggling to find people willing to pay his prices. After going on a $3B shopping spree, acquiring and rehabilitating some of the most acclaimed properties across the country, he is struggling to fill his buildings, and investors are turning away from the developer’s promises, The Wall Street…

A New York Developer Binged on Trophy Properties. His Wager Is Flailing.

New York real-estate developer Michael Shvo went on a multibillion-dollar shopping spree from 2018 to 2020, acquiring some of America’s most storied properties. He bought Miami Beach’s Raleigh Hotel and announced plans to modernize the art deco building and develop adjoining luxury condos. He reached a deal with Mandarin Oriental to develop high-end condos…

Tishman Speyer Makes $100M South Florida Industrial Debut

The Rock Lake Business Center totals 256,000 square feet across two buildings. Image courtesy of Tishman Speyer Tishman Speyer has entered South Florida with the acquisition of Rock Lake Business Center in Pompano Beach. IDI Logistics sold the 35-acre property for $100.2 million. The industrial campus currently includes two fully leased warehouses totaling 256,000 sf…

Citadel Takes More Space At 830 Brickell As Tower Gets Finishing Touches

Ken Griffin’s hedge fund is looking to spread out in Miami’s most anticipated office tower. Citadel signed on for two more floors at 830 Brickell, the under-construction tower in Miami’s financial district that was a magnet for pandemic-era corporate expansions. The hedge fund will be the largest tenant in the building, with 130K SF across eight floors. A Citadel spokesperson…

Lease roundup: Citadel expands at 830 Brickell; more…

Billionaire Ken Griffin’s Citadel expanded its office at the 830 Brickell tower that is expected to be completed this summer. Citadel leased the 13,100-square-foot 14th floor and the 14,400-square-foot 15th floor at the 55-story tower at 830 Brickell Plaza in Miami, said Brian Gale, who is part of the Cushman & Wakefield team leasing the tower. The deal gives Citadel a total…

Turnberry Associates, Elion Partners and members of the Sredni family are suing Stantec and three subcontractors

A group that developed a Trader Joe’s-anchored mixed-use building in Miami Beach is accusing global architecture firm Stantec of shoddy design work, according to a recent lawsuit. The complaint, filed last week in Miami-Dade Circuit Court, alleges Stantec and four subcontractors are responsible for design flaws that led to $1.8 million in delays and cost overruns during…

What’s Inside The $2.7B Plan To Protect Miami Real Estate From Catastrophic Floods

Streets in Miami are flooding this week, as South Florida kicked off summer with a dayslong deluge that is set to drop up to 10 inches of rain through Friday. As the rain pours in and Floridians take advantage of a hurricane tax holiday, county officials and the Army Corps of Engineers are putting the final touches on a $2.7B plan to protect Miami from storm surge. The plan has been…

Joint Venture Receives $575M Refinancing for Diplomat Beach Resort in Hollywood

JLL’s Hotel & Hospitality group has arranged $575 in refinancing for the Diplomat Beach Resort, a 1,000-room beachfront resort located in Hollywood, roughly 10 miles south of Fort Lauderdale and 20 miles north of Miami.  Kevin Davis and Mike Huth of JLL secured the financing on behalf of the borrower, a joint venture between funds managed by Trinity Investments…

‘One Hollywood Residences’ to Break Ground in 2025 at 1817 Taylor Street in Hollywood

A now-vacant parcel in Hollywood, Florida, will soon find new life as a 22-story residential venture. One Hollywood Residences will feature 248 units ranging from 517 to 1,425 square feet, with construction expected to start next summer. According to Condo Blackbook, floorplans range from studios to three bedrooms, offering 11 different layout plans. Future residents will…

Developer Completes 281-Unit Apartment Complex At 200 NE 1st Avenue In Pompano Beach

Cavache Properties has completed Old Town Square, a 281-unit apartment complex in the heart of Pompano Beach’s burgeoning Old Town neighborhood. Located at 200 Northeast 1st Avenue, Old Town Square, designed by Fort Lauderdale-based Adache Group Architects, is the first significant project in this historic downtown area where city officials actively…

Construction Tops Off On Selene Oceanfront Residences In Fort Lauderdale Beach

Construction has topped off on Selene Oceanfront Residences, a 26-story dual-tower condominium at 151 North Seabreeze Boulevard in Fort Lauderdale Beach. Designed by Kobi Karp Architects, with interiors by ID & Design International and developed by Kolter Urban, the 194-unit condominium development will offer panoramic views of the Atlantic Ocean, Intracoastal…

Developer plans 20-story Fort Lauderdale condo tower, amid surge in South Florida proposed projects

A developer proposes a 20-story boutique condo tower near Fort Lauderdale’s waterfront, amid a surge in South Florida planned projects. New York-based Moore Group, led by Gareth and John Moore, wants to build the 38-unit Amalfi on a 0.8-acre site at 2317-2237 North Ocean Boulevard, according to an application filed to the city last month. Designed by Kobi Karp, condo units…

13th Floor to build 124 condos in Coconut Creek

13th Floor Homes and its partners won site plan approval to build a 124-unit condominium complex in Coconut Creek’s master-planned, mixed-use MainStreet area. The Coconut Creek City Commission on Thursday unanimously approved a site plan for six four-story condominium buildings with 16 to 24 units each on 4.8 acres at the southeast corner of Collum and Banks…

‘Boulevard Gardens’ to Offer 92 Affordable Housing Units in Unincorporated Broward County

Broward County’s getting a new affordable housing development for seniors. Boulevard Gardens will comprise a six-story and three-story building, offering a total of 92 residences. According to the South Florida Business Journal, 90 percent of the units (82.8) will be reserved for those earning 60 percent of the area median income (AMI). The remaining 18 would be for those earning…

Foundry, Wheelock land $52M construction loan for Boynton Beach industrial complex

Foundry Commercial and Wheelock Street Capital scored a $52.3M construction loan to build an industrial complex in Boynton Beach. First Citizens Bank provided the financing for Egret Point Logistics Center, which will consist of two warehouses at 3800 South Congress Avenue, a press release states. A JLL team led by Steven Klein and Melissa Rose represented…

Bark Management expands Boca Raton commercial portfolio with $16M purchase

Boca Raton-based Bark Management expanded its commercial portfolio in its home city after acquiring an office campus for $15.7 million. An affiliate of Bark acquired The Greenhouse, a pair of office buildings spanning 93,000 square feet at 5255 and 5301 North Federal Highway, a press release states. Douglas Mandel and Zach Levine with Marcus & Millichap…

Place Projects, NDT score $84M construction loan for Nora, amid Bank OZK lending bonanza

The developers of the mixed-use Nora District in downtown West Palm Beach landed $84 million in construction financing, marking Bank OZK’s continued lending spree in South Florida. The 40-acre Nora District is a multi–phase project being developed by Miami-based Place Projects, West Palm Beach-based NDT Development and Greenwich, Connecticut-based Wheelock…

Two Good Inflation Reports and Another Steady Fed Meeting

Highlights: May’s Consumer Price Index signaled a continuation of disinflationary progress after largely stalling out in the first quarter.As expected, the Federal Reserve unanimously voted to keep its policy rate unchanged at a 23-year high between 5.25% to 5.50% for the seventh consecutive meeting.June’s summary of economic projections implied one, 25 basis point (bps) cut…

The Impact of Work from Home on Interstate Migration in the U.S.

The annual share of people moving from one U.S. state to another has declined substantially over the past several decades. According to our analysis of data from the American Community Survey (ACS), annual interstate migration among working-age adults (ages 18-64) fell from 2.74% in 2005 to 2.40% in 2019, a decrease of 13%. (See the figure below.) A frequently raised concern…

After shrinking for years, average size of new apartments bounces back

More two- and three-bedroom apartments were added to the market last year, pushing the average size of a new apartment to 916 square feet. That’s up by 27 square feet from one year prior, according to RentCafe. The sharp annual increase bears a stark contrast to the longstanding trend of shrinking apartment size over the past several years. From 2018 to 2022, average…

Multifamily sector nationally ‘a mixed bag’ as rent gains persist, but remain tepid

Yardi Matrix’s Multifamily National Report for May succinctly called the month’s performance “a mixed bag,” with the fourth consecutive month of rent gains, albeit slim. The average multifamily asking rent nationwide grew to $1,733 in May, up $6 month over month and a tepid 0.6% year over year. Rents continue to increase in a normal seasonal pattern as demand remains…

Moving Closer to Consistency with a National Definition of Zero Emissions Buildings

Overview: Defining Zero Emissions Buildings Last week, the US Department of Energy (DoE) released a federal definition of a zero emissions building. By providing a standardized definition with accompanying metrics, the administration aims to help propel the shift to zero emissions buildings in the US. It created the definition and accompanying implementation guidance…

Regulatory Developments Related to Managing the Financial Risks of Climate Change – Q2 2024

Introduction Financial regulators have continued on their journey to address the financial risks of climate change, with US agencies making progress on the Financial Stability Oversight Council’s (FSOC) four step recommendations to build regulatory capacity; fill data gaps; improve disclosure requirements; and finally, assess and mitigate climate-related financial risks.

The Fed: Commercial Real Estate in Focus

Commercial real estate (CRE) is navigating several challenges, ranging from a looming maturity wall requiring much of the sector to refinance at higher interest rates (commonly referred to as “repricing risk”) to a deterioration in overall market fundamentals, including moderating net operating income (NOI), rising vacancies and declining valuations. This is particularly true…

Video: MSCI Executive Director Jim Costello Discusses Industrial Real Estate Insights and Updates

The Discussion: The Evolution and Outlook of the Industrial Real Estate Market Introduction In a recent episode of America’s Commercial Real Estate Show the spotlight was cast on the industrial real estate sector—a segment that has experienced a dynamic shift from being the “dirty shoe” to a coveted asset class. This transformation, largely fueled by the pandemic…

The Fed on the Broad, Continuing Rise in U.S. Credit Card Debt Delinquency

In August 2023, a Regional Economist article described a recent rise in credit card debt delinquencies. In this blog post, we highlight that the increase in U.S. credit card delinquencies has continued. While the incidence varies, rising delinquency is pervasive across geographies and different metrics. We base our analysis on quarterly data from the Federal Reserve Bank…

JP Morgan: Understanding the real estate capital stack

The capital stack is a useful way to represent a commercial real estate deal’s financial structure and the balance between different types of capital used to finance a property. A commercial real estate property’s capital stack can be critical in determining the investor’s returns and the degree of risk they could take on. What is the capital stack in real estate? The types of capital…

Most U.S. Apartment Markets Recording Occupancy Improvement

A sum of April and May’s month-over-month apartment occupancy increases shows that most markets across the country are seeing signs of improvement in local readings. The nation overall saw April and May combine for a 0.1% increase in occupancy, according to data from RealPage Market Analytics. The same time last year, occupancy rates ticked down by a rounding…

Gov. Ron DeSantis signs bill tied to controversial balance of power at condo-hotels

Gov. Ron DeSantis approved a law that addresses the delicate balance of power between residents and investors at condo-hotel complexes. House Bill 1021 mainly deals with the issue of fraud, election meddling, withholding of records and other mismanagement by boards of directors and property managers at condo associations. Yet, the Florida Legislature this session approved…

The post Miami Commercial Real Estate News June 19, 2024: $668M Construction Loan Secured for Miami Supertall; Dev Site Trades for $39M, 500 Units Planned; More… appeared first on Hawkins Commercial Realty.

The Discussion: The Evolution and Outlook of the Industrial Real Estate Market

Introduction

In a recent episode of America’s Commercial Real Estate Show the spotlight was cast on the industrial real estate sector—a segment that has experienced a dynamic shift from being the “dirty shoe” to a coveted asset class. This transformation, largely fueled by the pandemic and subsequent shifts in consumer behavior, has prompted keen interest and debate among investors and industry experts. Jim Costello, Executive Director of MSCI Research, joined the show to provide insights into the recent developments and future outlook of this sector. The subject matter of this conversation revolves around industrial real estate nationwide, thus it should be noted that insights might have diminished relevance to Miami area industrial property.

Pandemic’s Impact on Industrial Real Estate

The COVID-19 pandemic was a turning point for the industrial real estate market. As lockdowns forced consumers indoors, online shopping soared, driving an unprecedented demand for industrial space to accommodate the surge in e-commerce. Amazon, a key player in this sector, ramped up its leasing to meet the rising need for storage and distribution. Costello noted that this demand spike was partly temporary, driven by the pandemic’s extraordinary circumstances.

As vaccinations rolled out and normalcy began to return, the demand for industrial space stabilized. This rebalancing reflected a return to the pre-pandemic growth trajectory of online shopping, characterized by a slow, steady increase in demand for industrial properties. Costello emphasized that despite the temporary contraction, the long-term outlook remains positive, with steady growth expected as online shopping continues to evolve and expand.

Industrial Property Performance Amid Economic Uncertainties

The industrial real estate market has shown resilience despite the broader economic uncertainties. The Federal Reserve’s measures to curb inflation, including interest rate hikes, have impacted the overall economy but have had a nuanced effect on the industrial sector. While rising rates could potentially dampen investment, Costello highlighted that the industrial market continues to attract investors due to its predictable income streams.

He explained that although inflation has not declined as quickly as anticipated, the specific factors driving inflation—housing and automobile insurance costs—have minimal direct impact on the industrial market. This sector’s performance remains strong, supported by continued investor interest and the relative stability of cap rates. Cap rates, though increasing, have not risen as sharply as interest rates, thanks to the ongoing growth in rental income, which helps maintain attractive investment returns.

Future of Industrial Real Estate

Looking ahead, the industrial real estate market is poised for continued stability and growth. Deal volumes, while slightly down from the previous year, remain high compared to pre-pandemic levels. The sector’s attractiveness as an investment is reinforced by its ability to generate stable income, even in a higher interest rate environment.

Costello observed that the challenge for investors now lies in balancing the costs of new construction with the benefits of existing assets. Inflation has driven up building costs, making new developments less economically viable and thus reducing competitive pressures. This scenario creates a favorable environment for existing industrial properties, which continue to be in demand among investors seeking reliable returns.

Interest Rates and Economic Influences

Discussing the outlook for interest rates, Costello pointed out that the Federal Reserve’s future actions would likely be influenced by ongoing inflationary pressures and broader economic conditions. While predicting exact movements is challenging, the interplay between inflation, economic growth, and political considerations will shape the Fed’s decisions. Investors in industrial real estate should prepare for a potentially stable interest rate environment as the market adjusts to these dynamics.

Conclusion

The industrial real estate market has emerged as a robust and attractive asset class, benefiting from shifts in consumer behavior and economic conditions. Despite challenges such as inflation and rising interest rates, the sector’s fundamentals remain strong, driven by steady demand and investor confidence. As the market navigates these complexities, industrial real estate continues to offer compelling opportunities for investors seeking stability and growth. The insights shared by Jim Costello in this video underscore the sector’s resilience and potential, making it a focal point for investors in the evolving landscape of commercial real estate.

The post Video: MSCI Executive Director Jim Costello Discusses Industrial Real Estate Insights and Updates appeared first on Hawkins Commercial Realty.