Editors’ Weekly News Roundup, Feb 20th – 24th
California is the Golden State and a land that has provided countless opportunities over the years across a variety of sectors. That being said, this past week’s two top stories on Connect CRE were about leaving California.
The California Exodus Continues resonated with Connect CRE’s readers both in California and nationally. It’s based on U.S. Census Bureau data showing that the state’s population has decreased by more than 500,000 people since July 2020, the height of the pandemic. For context, though, that’s a loss of a little more than 1% of the state’s 2020 populace of nearly 40 million.
Meanwhile, two Sun Belt states—Texas and Florida—have led in population growth over the same time period, with many new residents apparently lured by lower housing costs, among other things. It remains to be seen whether those two states eventually face the same issues of traffic jams and high-priced housing that evidently are leading some Californians to pick up and move.
Shopping center giant Unibail-Rodamco-Westfield isn’t taking its California properties and rebuilding them elsewhere; it’s exiting the U.S. market altogether, property by property. The latest iteration of this exodus, URW Sells Another Southern California Mall, was the past week’s second most-read story.
The mall in question is the 1.3-million-square-foot North County Mall near San Diego. URW has divested its ownership of the property but will maintain its leasehold interest, which runs for 30 more years. It’s the third Southern California shopping center sale URW has executed in the past six months, during which time the France-based owner-developer has also announced redevelopments of properties elsewhere in the U.S.
Store traffic at Class A malls such as URW’s has been strong in recent months. However, the good times aren’t likely to last. The Economic and Strategic Research Group at Fannie Mae says the unexpected robustness in retail sales, and the recent “blowout” labor report, don’t mean a reduced likelihood of recession.
Fannie Mae Sees Fed Pursuing “Higher for Longer” Interest Rate Policy, the third best-read story of the past week, detail the GSE’s predictions for an impending slowdown. Far from portending a more dovish approach by the Federal Reserve, recent data releases raise the possibility of the Fed both pushing its federal funds rate target higher than currently expected and keeping it there for longer, according to Fannie Mae.
High interest rates are among the likely causes for decreased homebuyer demand. Redfin reported on a drop in total U.S. residential value the likes of which hasn’t been seen since the Global Financial Crisis. U.S. Home Value Declines $2.3T in Biggest Drop Since 2008, the past week’s fourth most-read story, reported that the six-month decrease occurred after home values reached a peak of $47.7 trillion in June 2022.
Along similar lines as the Fannie Mae forecast, another report from the nation’s capital came from the Real Estate Roundtable. The group’s latest Economic Index found industry executives with mixed feelings about the outlook for 2023 and was the basis for the past week’s fifth most-read story, Real Estate Roundtable: Industry Execs More Optimistic About the Future, Less So About the Present.
The Roundtable’s Q1 Economic Index reported that industry executives, although optimistic about the future, remain uncertain about current market conditions. They cited inflation, rising interest rates and supply chain disruptions as concerns.
However, executives polled by the Roundtable also said that perceptions and outlooks differ across asset classes. The story remains positive for multifamily and industrial, while for office, eh, not so much.
As a case in point for industrial’s continued strength, developer CRG scored a hole in one with its first The Cubes-branded development in its native Chicago. Developed on spec, the massive property in suburban Country Club Hills, IL was leased in its entirety to a national manufacturer that plans to utilize the location for its Midwest distribution operations.
Even as industrial keeps riding high, though, the news isn’t entirely bleak for the office sector. In the latest edition of Weekender, Amy Sorter reports on a new level of collaboration between occupiers and landlords. You can read the full story here.