Happy Friday!

Lots of charts today. Data from CBRE and Colliers shows cap rates for both multifamily and industrial rising with interest rates. Boston Properties grows its credit facility in a possible sign that it will start strategically buying office opportunities. The jobs report came in hot with 336,000 jobs added, far above the 170,000 expected. Companies continue to grow their debt despite Fed interest rate hikes and the UAW strike could go on for time if strikes continue to avoid manufacturing facilities for the most profitable car models.

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Capital Markets

Market News

• Payrolls employment rises by 336k in September, far above the 170k Dow Jones estimate, while the unemployment rate stayed at 3.8%. The data shows a stronger than expected U.S. economy despite higher interest rates, labor strikes, and government shutdown fears (CNBC, BLS)

• Oil prices drop down to $82 a barrel after having soared last week. Gasoline futures also dropped on Wednesday hitting their lowest in 2023 (Investors)

• Since the start of the first rate hike in early 2022, companies with investment-grade credit have added roughly half a trillion dollars of net debt. These same investment grade companies have seen their financial health deteriorate as their interest coverage has been edging lower with each rate hike (Yahoo)

• United Auto Worker’s strike could last many months as strikes have been limited to select plants and avoided the highly profitable sectors like full-size trucks manufacturing sites. A strike expansion to plants producing these vehicles could be the knockout punch the UAW is waiting to strategically unleash (NPR)

CRE Headlines

• Higher interest rates are fueling multifamily cap rate expansion. CBRE research shows multifamily cap rates crept up another 25bps in Q3 2023. Average going-in cap rates are hovering at 4.92%, roughly 70bps above 2018-2019, and the spread between going in and exit rates fell to 15bps (CBRE)

  Quarter-over-Quarter Change in Interest & Cap Rates

  

• U.S. office groundbreakings declined in Q3 to the lowest levels since 2010. Since the start of 2020, office assets delivered after 2015 have posted positive net absorption and occupancy gains of 9mm sf each quarter over the last three years. Quarterly deliveries are expected to drop to as low as 3mm sf per quarter in 2025, potentially placing supply constraints on high-end office product (JLL)

  U.S. Office Quarterly Groundbreaking Volume

  

• U.S. Industrial market is cooling off with increases in vacancy and cap rates across the nation. Based on Colliers research national vacancy increased from 5.0% midyear 2022 to 6.9% midyear 2023. Cap rates expanded from 5.5% to 6.0%, but average NNN rents rose from $7.49/sf/yr to $8.07/sf/yr (Colliers)

  Historical National Industrial Data

  

• A loophole in the mayor of Los Angeles, CA’s executive order from December 2022 to fast-track approval of 100% of affordable housing projects allowed a couple of projects to slip through which would see large multi-story buildings built in single-family residences. The mayor since revised the order in June 2023 but eight proposed projects still remain in San Fernando Valley’s pipeline which are causing resident outrage (DailyNews)

• Boston Properties (NYSE: BXP) exercises its $315mm accordion feature on its revolving credit facility to expand its borrowing capacity to over $1.8bn. It’s expected BXP will start to deploy cash to acquire distressed office assets over the next 12 to 18 months (Crain’s, BXP)

Deals Deals Deals

Sales

• Office: Artemis Real Estate Partners acquires an undisclosed percentage of 655 15th St NW. in D.C. for $305mm based on public records. The 657k sf office building was previously owned by Blackstone (80%) and Boston Properties (20%). The asset was 58% leased as of Q2 (Bisnow)

• Industrial: EQT Exeter buys a two-building portfolio from Rockefeller Group for $106mm in Fort Mill, SC. The 1mm sf industrial park is known to have included tenants Silfab Solar, Element Designs, and Motion Industries (commercialsearch)

• Multifamily: GID acquires a 315-unit garden-style community from Carroll Organization for $79mm. The asset is located north of Atlanta, GA and was financed with a 10-year Fannie Mae CMBS loan (MHN)

• Mixed-Use: Property Markets Group buys a one-acre assemblage in Miami, FL’s Wynwood neighborhood for $20mm (CommercialObserver)

• Healthcare: Sila Realty Trust acquires a 105k sf outpatient health center from Healthcare Realty Trust in suburban Chicago, IL for $60mm. The property was built in 2010 and is leased to Loyola Medicine (REJournals)

• Cold Storage: Lineage Logistics buy a 1.3mm sf, eight-property cold storage portfolio from Burris Logistics. The portfolio consisted of facilities across FL, GA, OK, DE, WI, and MD (commercialsearch)

• Industrial: Venture One acquires a three- building, 100% leased, industrial portfolio from Ares Industrial Management. The 541k sf portfolio was located in suburban Chicago, IL (connectcre)

Debt

• Office: Fulton Street Companies secures a $233mm loan from Bank of the Ozarks and Manulife to fund the development of a 360k sf office building in Chicago, IL’s Fulton Market district (REJournals)

• Multifamily: AAA Management secures a $100mm debt and preferred equity construction financing package for a 302-unit San Diego, CA multifamily development. Bank OZK provided a 3-year, 75% LTC $66mm loan, and Pacific Union provided $34mm in preferred equity (MHN)

• Industrial: Wharton Industrial secures a 5-year, fixed-rate, $34mm loan from Securian Asset Management for a 10-property industrial portfolio in the Philadelphia, PA MSA (JLL)

• Self-Storage: GoodFriend Storage secures a $28mm bridge loan to refinance the existing debt and fund the lease-up of a 990-unit, 123k sf Long Island self-storage facility in NY (REBusinessOnline)

• Multifamily: GreenLite Holdings secures a $21mm acquisition loan to to renovate a 252-unit apartment community in Oklahoma City, OK. The 30-month, nonrecourse, interest-only loan was funded by RRA Capital (CommercialObserver)

Developments

• Office: Northwest Mutual started construction on the $500mm office redevelopment of North Office Building in Milwaukee, WI. The company will gradually relocate employees from its 880k sf campus in Franklin, WI (commercialsearch)

• Healthcare: PMB and Santa Clara Valley Healthcare break ground on a 230k sf medical office building in San Jose, CA. The asset is expected to be delivered in 2025. Capital One provided a construction loan for $205mm in 2022 (commercialsearch)

• Multifamily: Palladium USA begins construction of a $65mm affordable housing project in San Antonio, TX. The 271-unit multifamily development is expect to be completed by end of 2024 (REBusinessOnline)

• Multifamily: Legacy Partners and Pondmoon Capital Holdings announce the opening of a 296-unit mixed-use community north of Dallas, TX (YieldPro)

• Multifamily: Gilbane Development Company and Summit Smith Development deliver a 273-unit apartment community in Madison, WI (REJournals)

Leasing

• Industrial: ReadySpaces signs a 110k sf lease with Simone Development Cos. in Mount Vernon, NY. The flex warehouse storage provider will occupy the entire building (commercialsearch)

• Office: Regus renews its 37k sf lease at 14 Wall St in New York City’s Financial District. Asking rent was $50/sf/yr (connectcre)

Meme Summary