Happy Friday!

Discount retailers were the most active retail tenant in 2023 with Dollar Tree and Five Below alone leasing a 3M sf, drop in office values impacting CBD and suburban assets differently, retail is increasing in importance for office assets, and boomers are staying in their homes longer. January wholesale prices beat expectations, the 10-Year spikes above 4.3%, retail sales drop sharply in January, and bank’s rate cut predictions from early in the year could be completely off

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Capital Markets

Market News

• January Wholesale Prices Rise 0.3%, Above Expectations

  The producer price index, a measure of prices received by producers of domestic goods and services, rose 0.3% in January, above estimates from Economists surveyed by Dow Jones of 0.1%. The report comes days after the CPI also came in a above expectations and complicates the inflation picture

• 10-Year Treasury Yield Jumps Past 4.3%

  U.S. Treasury yields spiked on Friday after January wholesaler prices came in higher than expected. The 10-Year had been hovering in the ~4.1% range since the start of the year with market expectations of a rate cut

  10-Year Treasury YTD

  

• Retail Sales Show Massive Decline In January

  Retail spending declined by 0.8% in January likely due to the cold weather. Economists had predicted a 0.1% decrease in spending. Spending at gas stations and home improvement stores fell by 1.7% and 4.1%, respectively. Online sales contracted 0.8%. Retail sales had increased 0.4% in December

• December Rate Cuts Predictions By Bank Vs. Outlook

  With inflation coming in hotter than expected in January, and both GDP and employment rising more than expected many economists are revising their expectations for a rate cut. The result is that many are now speculating a rate cut in June. Below is a list of rate cut predictions based on reports from the beginning of the year when optimism was at its highest

  
  

CRE Headlines

• Discount Retailers Most Active Tenants In 2023

  According to a report from JLL, discount retailers were the most active retail tenants in 2023 with Dollar Tree and Five Below being the most active, signing 3M sf in 2023. As shoppers become more price-conscious Dollar stores, mass merchandisers and off-price retailers are poised to benefit. Bargain retailers and QSRs were two of the groups to announce the most planned openings in 2023. The overall retail market also faired well in 2023 all major metros, with exception of Boston and San Francisco, saw rent growth with Chicago coming in at the low end with1.2% and Phoenix at the high end with 9.2%

  Top Retailers Who Signed Leases In 2023

  

• Drop In Office Values Varies Between Suburban And CBD Office

  With lower tenant demand and higher interest rates, office values have declined due to both a decrease in occupancy and increase in cap rates. However data from MSCI points at varied differences between suburban and downtown (central business district) office assets. An owner of CBD office who bought at the height of pricing in Q1 2022 would likely realize a 40% to 46% loss in Q4 2023, while an owner of suburban office who acquired the asset at the peak of pricing (in Q3 2022) would see a 17% to 22% loss in Q4 2023

• Retail Playing And Important Role In Office Assets

  Office landlords are increasingly willing to work with local retailers to provide options and amenities to their office tenants. A report from Collier’s emphasizes short-term partnerships which can help boost foot traffic to assets and improve sales for well-stablished brands while creating an alternate source of income. The need for strong partnerships with local retailers becomes even more important as office asset are converted to multifamily as retail spaces can provide dining, grocery, and entertainment options for residential tenants

  Retail Move-Ins Within U.S. Office 

  

• Baby Boomers Are Staying In Their Homes Longer

  On average, U.S. homeowners spend 11.9 years in their home, up from 6.5 years two decades ago. Older Americans staying in their homes longer is driving homeowner tenure. Nearly 40% of baby boomers have lived in their home for at least 20 years, and another 16% have lived in their home for 10-19 years. For Gen Xers, 35% have lived in the same home for at least 10 years. Baby boomers are holding onto their homes as many own them free-and-clear, or with a low interest rate mortgage, for tax reasons (Prop 13, Deferred Tax in TX), familiarity with home/neighborhood, and because it would be difficult to move in the current market

  American Home Tenure By Age

  

Deals Deals Deals

Sales

• Retail: Elysee Investment Company acquired a 90K sf grocery-anchored center in Aventura, FL, for $48M

• Retail: A JV between The Sembler Co. and Forge Capital Partners has acquired Palm Plaza, a 133K sf Publix-anchored retail center located in Leesburg, FL, from Crosspoint for $18M

• Multifamily: Knightvest Capital acquires Cypress Apartments, a 276-unit garden style apartment community in suburban Dallas, TX

• Multifamily: Jacksonville Housing Authority acquires a 256-unit multifamily community in Jacksonville, FL from Interwest Capital. The asset was 92% leased at sale

• Multifamily: Helio Group acquires a 135-unit multifamily asset in Los Angeles, CA from Greystar 

Debt

• Multifamily: Florida East Coast Realty has secured a $420M financing package to refinance an 85-story mixed-use residential, hotel and office building in Miami, FL’s Brickell neighborhood. The debt package involves a five-year, $335M Freddie Mac-backed senior loan with a 35-year amortization by Greystone Servicing Company and $85M of subordinated debt

• Multifamily: A JV between Brause Realty and Lonicera Partners secures $75M of construction financing to develop a 157-unit multifamily asset in New York, NY’s Murray Hill neighborhood. JPMorgan Chase and First Citizens Bank provided the loan

• Multifamily: Young Development secures $42M in the form of a Fannie Mae DUS loan for The Palms at Cape Coral, a 280-unit luxury multifamily asset in Cape Coral, FL. The non-recourse, fixed-rate loan carries a 10-year term with 30-year amortization and 5 years of interest-only payments

• Multifamily: Tay Investments secures a $31M bridge loan for The Art of Newark, a recently completed 155-unit multifamily asset in Newark, NJ, from IDB Bank

Developments

• Data Centers: Edged Energy, a subsidiary of Endeavour, announces the launch of four U.S. data centers totaling over 300MW aimed at AI workloads. The first phase includes assets across Atlanta, Chicago, Phoenix, and Kansas City

• Student Housing: Greystar delivers a $282M, 667-bed student housing asset in San Francisco, CA near UC Law San Francisco

• Industrial: Sansone Group and Raith Capital Partners are developing Rancho Del Rey Logistics Park, a three-phase, 4M sf industrial center in El Paso, TX

Capital Raising

• PropTech: Arch, a software company that caters to HVAC installers, raises $6.2M in seed round with Gigascale Capital and Coatue leading the round. Floodgate, ReGen Venutres, and MCJ Collective also participated

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