Editors’ Weekly News Roundup, May 22nd – May 26th

Commercial property prices across all major sectors declined 9.4% year-over-year in April. MSCI Real Assets

If there’s one over-arching theme in the five most read stories of the past week, it’s that Connect CRE readers follow our content to be informed rather than entertained, and to gain insight into where the opportunities are—or where they aren’t. Although a story farther down the list focused strictly on the challenges facing the office sector, the week’s top story made the point that certain challenges aren’t limited to office real estate. 

Fitch: CRE Refi Risk Extends Beyond Office Loans detailed a newly issued report from Fitch Ratings that widened the circle of commercial property sectors in which refinancing a loan could be problematic. Although office is one of those sectors, office loans actually performed better in hypothetical refinancing scenarios than the average across all property types, according to Fitch. 

The rating agency didn’t single out industrial as one of the high-risk sectors when it comes to securing a refi, but the bloom is off the rose for the sector, at least in the near term. The week’s second most read story, Industrial Real Estate Development Heads for “Cyclical Reset”, was based on a Cushman & Wakefield study that showed demand losing speed as construction completions peak, setting the stage for a return to a more balanced market. 

Developers have responded by pulling back on new projects. However, there’s still the question of what happens to the hundreds of millions of square feet that are currently being developed. Cushman & Wakefield’s Carolyn Salzer observed that “the space under construction is nearly four times the size the pipeline was at year-end 2007.”

Even so, the industrial sector doesn’t have to come to grips with the secular changes that office is facing. Office REIT Stocks Plummet Amid Slow Return-to-Work Rate, the past week’s third most read story, is a case in point.  

The Wall Street Journal reported that with office occupancy having plateaued recently at levels far below the long-term average, share prices for two of the largest REITs in the sector are way down from their peaks. Then there’s the little matter of billions of dollars of floating- and low-interest-rate mortgages that will need to be refinanced in a higher interest-rate environment. 

That being said, it’s instructive to remember that brick-and-mortar retail was largely written off during the pandemic for a reason similar to the current argument against office’s viability: nobody was shopping in physical stores anymore. As a measure of how short-sighted that assessment has proven to be,  Crow Holdings Capital Forms $2.6B JV on Food- and Service-Oriented Retail, last week’s fourth most read story, demonstrated that institutional players believe retail is a good bet these days. Or certain types of retail, anyway. 

The new partnership with a global investor enables Crow Holdings Capital (CHC) to expand its retail investment strategy of acquiring small-format, convenience-oriented, open-air, food and service shopping centers. The partnership got off the ground with a $1.8-billion recapitalization of a 173-property portfolio owned by two real estate funds managed by CHC. 

Rounding out the top five was a story that presumably marks the end of a long-running stalemate and the beginning of a new chapter for an iconic New York City property. The owners of the Flatiron Building in Manhattan couldn’t resolve a dispute over renovations, and a judge ordered an auction.  

A Virginia-based investor outbid everyone for the office property in March, but then never showed up to pay any of the $190 million he bid. Therefore, the 121-year-old building went back on the auction block. 

On the second try, a group led by Jeffrey Gural, the majority stakeholder in the building, prevailed. Jeffrey Gural Lands Flatiron Building at Redo Auction for $161M drew readership both in New York and nationally. The Flatiron saga itself probably could have happened only in New York. 

Although Connect CRE’s daily news cycle will be on hiatus for Memorial Day, there are still opportunities to catch up with content you may have missed. A wealth of insights can be found in the latest edition of Weekender, including an examination of how institutional investors are adopting alternative financing strategies to get deals done in the current interest-rate climate. 


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).