Editors’ Weekly News Roundup, Jan 30th – Feb 3rd

It’s already difficult to secure financing. I don’t think this increase will have much more of an impact.Robert P. Hernandez, Managing Director, Debt & Equity, Northmarq

More than 40 years ago, Talking Heads recorded a song called “Don’t Worry About the Government.” It’s not a philosophy that’s always shared by Connect CRE readers, who made government—state, local and federal—the focus of three of this past week’s five best-read stories. 

Far and away the week’s most-read story was a Breaking News summation of a letter sent by environmental groups in California’s Inland Empire to Gov. Gavin Newsom. The letter called for a two-year moratorium on new industrial development in the region, which reportedly has seen 90% of Southern California’s warehouse construction in the past decade. 

It remains to be seen whether the governor will enact such a moratorium. But just the fact that it was proposed—and the thought that Newsom might give it serious consideration—was enough to draw reader attention to Breaking News: Inland Empire Groups Urge California Gov. to Stop New Industrial Development For Up To Two Years and an updated version of the story that ran in our California newsletter. 

Given the requirements of today’s industrial space users, a fair amount of older warehouse product is now functionally obsolete. That isn’t the case with disused office buildings, though—they can be reconfigured for residential use. A 43-story tower in Houston, vacant since Exxon relocated its headquarters to the suburbs in 2015, appears to be a candidate for such a conversion. 

Although the timetable for starting work on converting the former home of Exxon—and before that, Humble Oil—isn’t clear, we reported in Apartment Conversion On Way for Empty Houston Skyscraper that Shorenstein Properties has sold the office tower to a New York developer with experience in residential. It’s likely that the property’s local history, and the fact that it has been empty for years, helped make the story our second best-read for the week. 

The office sector was also the basis of this past week’s third most-read story. However, instead of being about vacant property, this was a story of office occupancy. Industry members with an interest in office fundamentals may have been following the weekly occupancy reports that building security firm Kastle Systems initiated during the pandemic, and the reports made headlines this past week. 

Office Occupancy Climbs Above 50% for the First Time Since Pandemic Began was the topline news of Kastle Systems’ report for the week ended Jan. 25. Average occupancy among the 10 metro areas tracked by the firm for its Back to Work Barometer was 50.4%, with Silicon Valley registering the lowest occupancy level and another tech hub, Austin, seeing the highest. 

The findings offset the bad news for office in another national story last week, in which CBRE reported that space demand in the sector turned negative in the fourth quarter of 2022 while industrial continued rolling along.

If the past week’s top story was about action that government might take, the top five was rounded out by stories about actions that government did take. In the fourth-ranked LA County Extends COVID Renter Protections Through March, the Los Angeles County Board of Supervisors voted to extend protections until March 31. 

While many multifamily owners would argue that the time for such protections is long past, the board did forward a motion to investigate potential funding for a $45-million program that would help smaller landlords who agree not to evict tenants for unpaid rent. 

Last but not least was another Breaking News story about a government action that pretty much everyone was expecting anyway. The Federal Reserve’s Federal Open Market Committee continued along the path of tightening monetary policy that it has trod for most of the past year.  

Even so, Fed Raises Benchmark Rate a Quarter-Point, After Five Consecutive Larger Increases suggested that the central bank may be tapping the brakes slightly as it approaches its terminal rate. Two financing experts Connect CRE interviewed for a subsequent Weekender story pointed out that this latest 25-basis-point increase in the federal funds rate is unlikely by itself to make much of a difference. In other words, the Fed’s Feb. 1 action probably won’t make financing any more challenging than it is already.  

Inflation, which the Fed is attempting to reduce, remains a national concern, although recent reports have seen the rate of inflation tapering. Another national issue is housing supply, and the Biden administration late last month introduced a blueprint for remedies at the federal level. 

However, a previous Weekender story that was seen by fewer readers than the past week’s top five made it clear that some of the major industry groups name-checked by the White House didn’t welcome the prospect of what the National Multifamily Housing Council called “potentially duplicative and onerous regulations.” Here again, the sentiment in that old Talking Heads song doesn’t exactly ring true, and readers are advised to familiarize themselves with what the White House is proposing.


Inside The Story

About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and GlobeSt.com at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).