Editors’ Weekly News Roundup, Nov 14th – 18th
This past week’s top story, Fed Rate Hikes Loom Over Multifamily Rent Growth, focuses on two trends we’ve been seeing in 2022: the gradual cooling of growth in apartment rents both nationally and locally, and the impact of the Federal Reserve’s four consecutive 75-point increases in the federal funds rate.
In recent months, reports have chalked up a slowdown in part to the impact of inflation on tenants’ budgets—although rent growth has continued to outpace the rate of inflation, which, of course, the Fed’s actions are intended to curb. However, the rate hikes themselves are cause for concern in the multifamily market. “The robust household formation that drove demand in 2021 is no longer in effect,” Yardi Matrix said this month.
The week’s best-read story mentions that the cooling-off has extended even to single-family rentals, a subset of multifamily that experienced torrid rent growth earlier this year. A story in the latest edition of Weekender goes into more detail on what’s happening with SFR rent gains.
Even with higher interest rates giving pause to would-be investors, large-scale acquisitions are still getting done, and they figure in three of the week’s top five stories. In the week’s second-ranked story, Houston Billionaire Buys SoCal’s Montage Resort, you’ll read how Tilman Fertitta, sole owner of the Houston Astros, came to be the owner of the Montage Laguna Beach hotel in coastal Orange County. The seller was Dajia Insurance Group, continuing a trend of Chinese institutional investors offloading the U.S. commercial properties they snapped up a few years ago.
A trend we’ve seen since the onset of the pandemic has been uncertainty about the future of the office sector at large, although some properties—particularly newer-construction Class A towers—have enjoyed the lion’s share of leasing activity. In Q3 Office: Ongoing Bifurcation, Increasing Uncertainty, that flight to quality is just one of the challenges facing office owners.
The week’s third best-read story drills down into some of the others: employee resistance to their employers’ return-to-the-office directives, the cost of capital hampering landlords’ ability to offer concession packages, and emerging macroeconomic headwinds that may limit tenants’ leasing expectations, to name a few.
Two more deals round out the top five stories. Kimco Adds 8 Long Island Shopping Centers for $376M details the Jericho, NY shopping center REIT’s acquisition of a privately owned portfolio in its own backyard, which turns out to be “one of Kimco’s most highly desired markets,” in the words of CEO Conor Flynn.
The tenant mix is attractive regardless of proximity to the buyer’s headquarters. Five of the eight properties are grocery-anchored, and the rosters of all eight go heavy on necessity retailers.
Last but not least, the fifth best-read story is Artemis Real Estate Partners’ $1B JV Buys Portfolio of 12 Medical Office Buildings. A joint venture between Artemis and Rendina Healthcare Real Estate, formed in 2021, has added MOBs in eight states as its latest acquisition. Medical office, as you’ll read in our Q&A with Colliers’ Shawn Janus, remains a top draw for investors.
Arguably the week’s most significant story wasn’t among the top five, or even top 10 in terms of readership. Producer Price Index Posts Modest Increase, Hinting at Downward Trend for Inflation charts some encouraging signs provided by recent economic data. Only time will tell whether these data are part of a longer-term trend, of course, but they do suggest that we may be turning a corner on inflation—and the magnitude of future rate hikes.