Editors’ Weekly News Roundup June 10 – June 14
Although brick-and-mortar retail has staged a remarkable comeback from the depths of the pandemic, the rising tide hasn’t lifted all boats. As a case in point, Federal Realty Investment Trust, among the oldest and most established REITs, decided to cut its losses and exit the Santa Monica market.
Federal Realty Exits Ownership on Santa Monica’s Third Street Promenade was themost-read story on Connect CRE for the week ending June 15, drawing readers from California and beyond. The company considers the $103-million sale of its eight-building mixed-use portfolio in this seaside community to be “a key step in our strategy to optimize our portfolio,” said CIO Jan Sweetnam. With occupancy in the Third Street portfolio well below the company’s average, it’s easy to see why.
The Golden State also yielded the week’s second-best-read story. Historically the state has set the pace for the rest of the U.S., but in this instance, it’s running counter to a national trend. That trend is toward growth in apartment rents, albeit at a slower pace than we saw following the pandemic, yet the California Apartment Association (CAA) reported that Apartment Rents Drop in Seven of 11 Major California Cities.
Among those seven are the state’s four largest cities: Los Angeles, San Diego, San Jose and San Francisco. CAA reported that a key driver of the negative rent growth wasn’t an abundance of new supply but rather a decline in demand.
Macroeconomic conditions can affect commercial real estate in numerous ways, and certainly the interest-rate environment is among the first such circumstances that come to mind. Following the Federal Reserve’s decision last Wednesday to maintain the status quo on rates, Connect CRE sounded out industry leaders for their reactions.
We incorporated what they told us into the week’s third-most-read story, CRE Lenders and Borrowers Have Adjusted to Fed’s Higher-for-Longer Policy. All agreed that the higher-rate environment, now in its 12th month at the current level, has made differences in the way CRE financing operates.
Staying with the theme of government policy while returning to the multifamily sector was Connect CRE’s fourth most-read story for the past week. Among the most active lenders in rental housing, Berkadia recently assembled a panel that delved into the politics of affordable housing and the unfortunate tendency of lawmakers to use rent caps to maintain affordability.
Berkadia Webinar Focuses on Affordability and the Threat of Rent Controlsummarized the conversation, which offered both a national perspective and a state-level view of the organized campaign to defeat a ballot initiative that would repeal California’s rent control preemption law. Sharon Wilson Géno, president of the National Multifamily Housing Council, warned, “what we’re facing in California, in terms of a repeal of the preemption, is something that could be faced across the country.”
Rounding out the top five was a story that might be called a prequel to the reaction story on the Fed’s interest-rate decision: a breaking news story on the decision itself. Although the central bank’s action at its June meeting was generally expected, Fed Leaves Rates Unchanged, Signals One Reduction by End of 2024indicated how the outlook has changed since the beginning of the year. At that time, industry members anticipated as many as half a dozen rate cuts. Now, it’s likely that we’ll get five—by the end of next year.