- Apartment Building Sales Drop 74%, the Most in 14 Years “Sales of rental apartment buildings are falling at the fastest rate since the subprime-mortgage crisis, a sign that higher interest rates, regional banking turmoil and slowing rent growth are undercutting demand for these buildings. Investors purchased $14 billion of apartment buildings in the first quarter of 2023, according to a preliminary report by data firm CoStar Group. That represents a 74% decline in sales from the same quarter a year earlier and would be the largest annual sales decline for any quarter going back to a 77% drop in the first quarter of 2009.” (The Wall Street Journal)
- CMBS Delinquency Rate Increases in March “The CRED iQ delinquency rate for CMBS increased for the second consecutive month in March to 3.77 percent. The delinquency rate was 19 basis points higher than the prior month’s rate of 3.58 percent. The increases in delinquency are congruent with headline risk related to industry-wide concerns surrounding commercial real estate debt in an economic slowdown. The delinquency rate is equal to the percentage of all delinquent specially serviced loans and delinquent non-specially serviced loans for CRED iQ’s sample of $600 billion-plus in CMBS conduit and single asset single-borrower loans.” (Commercial Observer)
- What a U.S. Debt Default Means for Multifamily Real Estate “The U.S. government is unlikely to default on its debt. Congress has always acted to raise the debt limit. Past debt-ceiling debates show even the threat of a default can impact the economy. If the U.S. defaults on its debt, there could be catastrophic effects, including reduced public confidence and increased market volatility. Multifamily property owners can take steps now to prepare for a possible default.” (jpmorgan.com)
- Debt Funds Alone Cannot Rescue Commercial Real Estate “Commercial real-estate losses will not greatly damage big banks in Europe, but the banks themselves could inflict real damage to commercial real estate.” (Euromoney)
- In a Distressed CRE Landscape, a Source of Rescue Capital May Already Be in the Deal “Lenders have generally been willing to offer extensions, yet most require the borrower to make a principal pay-down to align the “loan-to-value” ratio to current underwriting criteria. For their part, distressed owners may be unable or unwilling to contribute additional equity, while opportunities to refinance or sell are hampered by the current interest rate environment and other economic headwinds. This has driven borrowers to increasingly seek out rescue capital and alternative capital arrangements.” (Commercial Property Executive)
- Rising Rates Take Some Shine Off Private Markets “After years of shifting money into private market investments, public pension and investment funds are taking a fresh look at publicly traded debt, thanks to the highest yields in more than a decade. ‘Bonds are back,’ said California State Teachers’ Retirement System investment chief Christopher Ailman. He predicted that public pension funds will shift an additional 2% to 5% of assets into publicly traded debt, reversing a multidecade trend of shrinking fixed-income portfolios.” (The Wall Street Journal)
- Manhattan Office Vacancies Up, Asking Rents Down in Q1 “Manhattan’s office market began the year by rebounding from a dreadful fourth quarter of 2022, but that was about where the good news ended. Tenants took 7.4 million square feet of office space in the first quarter, a 49 percent increase from the fourth quarter, according to a Colliers report released Monday, but still about 270,000 square feet short of last year’s first quarter. Net absorption was negative 1.2 million square feet and average asking rents declined in all three submarkets tracked by the report.” (The Real Deal)
- The Long-Awaited New York City Office Repricing Wave Is Here “After three years of pandemic-induced paralysis for office owners, more are finally beginning to lower the asking price on their buildings and accept prices far lower than they paid. Office assets are under pressure caused by record-high vacancy rates and loan maturities coming due after the fastest interest rate-hiking campaign in history. Those pressures aren't likely to abate this year, and as employers sink into hybrid work patterns for employees, experts said the discounts aren't going anywhere soon.” (Bisnow)
- How Coworking Companies Delayed a Reckoning in the NYC Office Market “New York City’s office market was probably in trouble long before COVID-19 hit. A flight to quality and away from a glut of Class B and C properties was already starting to hammer the market before the pandemic arrived in early 2020. But that pivot wasn’t a problem because there were a number of tenants gobbling up space in the older crop of buildings: coworking companies.” (Commercial Observer)
- Real Estate Global Emissions Are Getting Worse. Many in Industry Have No Plans to Improve It. “Real estate is responsible for 40% of global greenhouse gas emissions, but a Bisnow analysis of real estate’s 75 largest institutional investors, listed companies and investment managers found that 32 have no overall plan to reduce the amount of carbon they put into the atmosphere. It is vital that a sector responsible for such a large proportion of emissions cuts back on its carbon output, the United Nations has said, to ensure the world limits global warming to 1.5 degrees Celsius or less by 2050 and avoids the worst impacts of climate change. To do that, climate experts say real estate needs strong decarbonization targets, and the biggest owners and managers in the sector are instrumental in leading that process.” (Bisnow)
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