Editors’ Weekly News Round Up February 19 – February 23
A theme underlying the top Connect CRE stories for the past week is that the near-term outlook is always in flux, and the prevailing wisdom may not continue to prevail with the passage of time. As a case in point, the most-read article for the week ending Feb. 25 offered a more positive view of the availability of debt and equity for commercial real estate.
Titled CBRE: CRE Lending Market is Stabilizing, the story discussed improvements in the CBRE Lending Momentum Index, based on the volume of CBRE-originated loan closings. “While the capital markets continue to present challenges, we are seeing more constructive lending conditions for specific asset classes,” said James Millon, U.S. president of debt & structured finance at CBRE.
At the same time, a sudden, drastic pullback in volume may reflect a longer-term trend. The Census Bureau’s monthly report on housing starts yielded the headline Multifamily Construction Starts Plunge Nearly 36% in Januaryand the week’s second most-read story.
It’s probably true that severe wintry weather in much of the U.S. aggravated the typical month-to-month volatility in the volume of apartment projects breaking ground. However, TD Bank economist Andrew Foran observed, “the [multifamily] segment faces headwinds in the form of high financing costs, slowing rent price growth and a build-up of projects under construction from the past few years.” As it is, 2024 is widely expected to surpass last year’s record volume of apartment deliveries, thanks to projects that were initiated in the post-pandemic era of double-digit rent growth.
As 2023 came to an end, CRE and the broader markets were optimistic that the coming year would see the Federal Reserve begin to reverse course on the benchmark federal funds rate, currently in a range of 5.25% to 5.50%. However, at the January meeting of the Fed’s policy-setting Federal Open Market Committee, the consensus appeared to be “easy does it.”
Fed Minutes Show Caution About Moving Too Fast on Rate Cuts,our third most-read story, reported that central bank officials would prefer to have more confidence that inflation was under control before implementing rate cuts. It also reported that derivatives traders now expect four quarter-point cuts by the end of 2024, whereas they’d anticipated as many as six only a month earlier.
The late Tony Bennett may have left his heart in San Francisco, but 2023 saw many tech investors and executives not sharing that sentiment, departing the Bay Area for up-and-coming tech hubs such as Miami. As 2024 progresses, though, it appears that they’re having a change of heart.
“An ecosystem such as SF’s that has been built over the last 50-plus years doesn’t just die because of a pandemic for a few years,” Mo Koyfman, founder of venture firm Shine Capital, told the Wall Street Journal. The city’s burgeoning recovery was detailed in Connect CRE’s fourth most-read story of the week, San Francisco Rebounds with Tech Revival.It drew strong readership both in California and nationally.
Although industrial was the only major CRE property type to experience year-over-year price appreciation in January, MSCI Real Assets reported that the downward trend is now losing momentum rather than gaining it. Our fifth most-read story, Declines in Property Pricing Slow Further in January,closed out the week on a hopeful note.