Editors’ Weekly News Roundup, Feb 6th – 10th
Two large-scale California deals and three forward-looking assessments comprised the past week’s five most-read stories. However, one of those forecast stories comes with a twist, about which more later.
Scoring a home run with the week’s largest readership was AASEG and Oakland Agree on $5B Coliseum Redevelopment Plan. The City of Oakland and African American Sports and Entertainment Group have struck a deal to redevelop the Oakland Coliseum into an affordable housing, entertainment and retail complex, possibly with a new pro sports team attached. The development is estimated to cost $5 billion.
One obstacle to reaching home plate, though, is the complex’s existing pro sports team. The Oakland Athletics own half the site, and any redevelopment plan would have to receive the team’s blessing. It remains to be seen whether this game will go into extra innings.
A cautiously bullish outlook on 2023 and commercial real estate was projected by Chris Lee, head of real estate Americas at KKR, in his discussion with Willy Walker, CEO of Walker & Dunlop. The past week’s second most-read story, Walker Webcast: KKR’s Chris Lee and the CRE 2023 (Mostly) Positive Crystal Ball, recapped the hour-long discussion in the Feb. 8 edition of the weekly series.
KKR’s appetite for commercial real estate acquisitions varies according to sector, but by and large the firm sees the uncertainty of 2022 beginning to dissipate. “We’re seeing signs that say that people are coming back into the market; people are taking risks,” Lee told Walker. “And by the way, there are a lot of institutions that have to put their cash to work.”
On the subject of putting cash to work, Related Companies’ California arm has lined up financing from Bank of America for a mixed-use residential community in Santa Monica. Related California Secures $385M Financing for Santa Monica Project was last week’s third most-read article, and it detailed the components as well as the timeline for the company’s latest development in the region.
Needless to say, development in Santa Monica is pretty much a sure thing in any market. “The centralized location offers convenient access to the best of the area – the Pacific Ocean, the mountains, culinary destinations and more,” said Related California VP Larry Wilkes.
It’s not exactly news that there has been a great deal of residential development in Austin, TX in recent years, both rental and for-sale. The tech hub and Texas state capital is one of four housing markets that Goldman Sachs thinks will suffer a 2008-like crash in home values, with the others being Phoenix, San Diego and San Jose.
In Austin, though, they’re not having it. Goldman Sachs is Predicting a RE Crash in Austin—Not so Fast, the fourth most-read story of the past week, offers a rebuttal from the Austin Board of Realtors. Home values are normalizing as interest rates creep upward, but that doesn’t equate to a crash, they say.
Looking at development, there still isn’t enough available housing in Austin, the Board says. As for Phoenix, we offered a similar rebuttal last week from Dave Chatham at Velocity Retail Group.
The outlook for office is more… well, let’s say it’s clearly murky. Law firm Cox Castle & Nicholson, which specializes in real estate, says that occupiers’ leasing decisions will be driven by the remote working model that was established at the height of the pandemic and now looks as though it’s sticking around.
Remote Working Will Continue Steering Office Leasing Decisions in 2023, Says Cox Castle’s Ouvrier, our fifth most-read story last week, says the office properties that will fare best in the current climate are those with flex space and top-tier amenities. The Los Angeles-based firm predicts we’ll be seeing more office landlords partnering with established flex space providers.
A little farther down in the ranking for most-read stories—in roughly ninth place—was a report from Trepp and CompStak that highlighted New York City office. Specifically, the billions of dollars in office-backed CMBS that will come due this year and next represent another challenge for landlords.
Although the New York area is the hub for looming office CMBS maturities, with more than a third of the $40.47-billion total across the 11 top metro areas, the Trepp/CompStak report discusses these maturities as a national concern. Manhattan may have more office space than any other market, but lease rollover and the challenges of the current financing environment are not peculiar to the Big Apple.
As with leasing, some office owners—in New York and elsewhere—are better positioned to pay off these loans than others, and it’s not a foregone conclusion that the $40.47 billion of CMBS will be added to the $175 billion of distressed commercial real estate debt that Bloomberg says already exists worldwide. Still, it’s a situation that will tap into reserves of resourcefulness and creativity.