Editors’ Weekly News Roundup April 15 – April 19
Federal Reserve Chair Jerome Powell made waves, and headlines, last week with comments that upended hopes of reductions in the effective federal funds rate starting to happen soon. That was the case among Connect CRE readers, who made Powell: Fed’s Inflation Goal “Likely to Take Longer Than Expected”our most-read story for the week that ended April 20.
Speaking at an event sponsored by the Wilson Center, the central bank leader said more time will be needed to see inflation reach the Fed’s target of 2%. He noted that while inflation declined “quite significantly” in the second half of 2023, there has been little progress year-to-date.
Powell’s comments led Connect CRE’s National newsletter on Wednesday. Later the same day, Peter Oppenheimer, Goldman Sachs’ chief global equity strategist and head of macro research in Europe, was the guest on the Walker Webcast. The hour-long discussion between Oppenheimer and Walker & Dunlop CEO Willy Walker was the basis for our second most-read story of the week, Walker Webcast: Goldman Sachs’ Peter Oppenheimer Explains Macro Issues and Cost of Capital Impacts.
During the webcast, Oppenheimer said that given the current global situation, it would be safe to assume that the “cost of capital won’t likely be trending down to zero again anytime soon. Business models and investment valuations need to adjust to that structural shift.”
Given this new reality, and the current uncertainty around tenant demand, it may come as a surprise to see that office development is on the minds of commercial real estate professionals. Yet plans for new office towers figured in not one, but two of the past week’s top five stories.
In late 2022 and early 2023, hedge fund giant Ken Griffin reached and then finalized an agreement with Vornado Realty Trust and Rudin to develop an office tower in Midtown Manhattan at a cost exceeding $1 billion. Some 15 months later, that scenario is moving forward as plans have been filed with the city.
Mayor Eric Adams broke the news at an event sponsored by the Association for a Better New York. Connect CRE reported the announcement in Mayor Adams Unveils 1.8M-SF Midtown Office Tower Plan, the week’s third most-read story with readership both in New York and nationwide.
Interest in office doesn’t negate attention to other property sectors, and the improving outlook for apartment investment drew Connect CRE reader interest as well. In Prime Multifamily Metrics Tick Upward for First Time in Two Years, we reported CBRE findings that going-in cap rates, exit cap rates and unlevered IRR targets for prime multifamily assets showed slight improvement in the first quarter. That uptick begins to reverse declines that started to become evident when the Fed began bringing the EFFR up to its current level.
“These developments suggest that key underwriting metrics may have reached their peak as the market anticipates potential rate cuts in the future,” said CBRE’s Matt Vance. “It is crucial for investors to closely monitor these positive developments as they navigate the multifamily market.”
Rounding out the top five with both regional and national readership, JLL Secures $290M Construction Loan for Dallas Office Highrisereported that Pacific Elm Properties obtained debt from Goldman Sachs Alternatives for Parkside Uptown. Slated to open in 2027, the 30-story development will offer tenant amenities galore—a distinct competitive advantage, according to JLL Research. It couldn’t have hurt the project’s financing prospects that it was 49% pre-leased, in this case to Bank of America.