Everest Holdings

Rent control?

Since 2010, 30% fewer housing units have been built in the U.S. than were needed to match households formed. We have a housing shortage and rent control is the surest thing to slow new housing.

Berkadia Webinar Focuses on Affordability and the Threat of Rent Control - Connect CRE The potential repeal in November of California’s Costa-Hawkins Rental Housing Act, which has barred local governments from instituting radical rent control since 1995, has implications beyond the Golden State, according to Sharon Wilson Géno, president of the National Multifamily Housing Council ...

During the Great Financial Crisis, property values bottomed before headlines suggested. We believe today’s discounts present strong long-term buying opportunities despite the remaining uncertainty in the market.
https://www.blackstone.com/pattern%20recognition/

Data center leases signed in 2023 had an impact equivalent to adding a second New York City to the power grid.

Huh?

In one year?

What the heck are we going to do about this?

Data Centers Projected To Consume Over 6% Of All U.S. Electricity By 2028 Data centers will soon account for 6.6% of U.S. energy consumption, up from less than 1.5% in 2018, according to TD Cowen.

Barring a major recession, Barry Sternlicht “guarantees” apartment rents will increase by 2026 because deliveries are dropping so precipitously. Yet operating expenses will certainly inflate during the interim. Batten down the hatches.

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Chicago plans to issue $1.25 billion in bonds to boost economic development and convert obsolete office buildings into apartments. Getting people back to the office sounds less expensive.
https://www.wsj.com/real-estate/commercial/chicago-to-offer-most-generous-subsidies-in-u-s-to-save-its-downtown-700a0076?st=ca0irxgg9bwammg&reflink=desktopwebshare_permalink

The NAR’s Pending Home Sales Index fell in April to under 60% in the western US (measured against a 2001 100% benchmark). The market feels frozen in by high mortgage rates and lack of affordability. What will cause a thaw? Nothing good, unfortunately.

Pending Home Sales Snapshot In March 2024, pending home sales rose 3.4% month-over-month.

First-quarter apartment demand has averaged 12% of the annual total over the past decade. Despite less pronounced seasonality since the pandemic, Q2 and Q3 leasing looks to be strong.

Do We Still Have a Prime Leasing Season? Over the last several years, demand during prime leasing season continues to account for most of annual demand – but at a far less acute rate.

Citigroup, HSBC, and Barclays are calling over 1,000 employees who were previously eligible to work from home back to the office five days per week. More of these kinds of mandates would be most welcome.

Citi, Barclays, HSBC ramp up full-time return to office push Major banks Citigroup (C), Barclays (BCS), and HSBC (HSBC) are pushing for more workers to return to the office for five days a week, according to Bloomberg. Yahoo Finance Reporter David Hollerith outlines each bank's latest RTO (return to office) mandate for a number of employees and their pivots f...

In Q1 2024, 38% of the national median household income was required for a mortgage on a median-priced new single-family home. Traditionally, 30% is considered the high threshold below which affordability rests. For families below the median, forget about home ownership. Perhaps it should be no surprise then that rental housing demand is so high.

www.cnbc.com

The closure of 150+ Macy’s locations among other recent store closure announcements could trigger co-tenancy clauses that decrease rents or nullify leases for neighboring tenants. This could impact recovery in mall performance since the pandemic.

The median discount to NAV for REITs ended April at 19.1%, down from 15% in March. All sectors experienced share price declines except for data centers. Higher rates are strangling the real estate industry.

NAV Monitor: REIT valuations down in April; close at 19% median discount This Data Dispatch is updated monthly and was last published April 2. The analysis includes US equity real estate investment trusts that trade on the Nasdaq, NYSE or NYSE American with market capitali

Institutional Investors are buying less than 2% of all homes. Home prices remain high for families because of a supply shortage, not because homes are getting bid up by large investors.

Charting a 22-year roller coaster of investor activity Investors own and rent 14.3 million attached and detached US homes. But there have been major shifts in investor activity.

KKR: "(Multifamily) Owners who can carry their investments … are poised to benefit from sustained structural demand and a pronounced shortage of new supply starting in 2026."

I wonder how long that will feel like.

When Fear Is a Friend – US Multifamily in Focus | KKR Rising interest rates have taken their toll on U.S. multifamily housing, as they have on other commercial real estate sectors. Learn more.

Theater foot traffic and revenues have shown no real signs of improving since the pandemic. Closures are increasing. What will owners do with vacant theaters?

Box-Office Bust Continues As Movie Theater Chains Report Losses, Falling Foot Traffic A combination of factors, including falling attendance, have contributed to disappointing earnings results from movie chains.

Yardi projects U.S. apartment rent growth to improve next year with continued growth in secondary markets and improved conditions in high-growth markets. In our view, higher financing costs and cap rate expansion will create an interesting window for investment ... assuming we have sellers.

Yardi Matrix > Matrix Bulletin-Multifamily Forecast-May 2024 Rent Growth Continues in Many Secondary Markets Heavy supply continues to weigh down asking rents in pandemic boomtowns. But many midsize markets in the Midwest, Northeast and South are still experiencing strong growth.

U.S. multifamily landlords say the percentage of residents leaving apartments to purchase homes hit a low in Q1. This occurred as rents rose slightly and concessions decreased. Rental housing is … ok.

Multifamily REITs Riding High Renewal Rate Into Peak Apartment Leasing Season Multifamily REITs are benefiting from the relative unaffordability of homeownership, keeping occupancy high ahead of peak leasing season.

Power for new data center development could be tapped out in as little as two years. The trick will be finding creative ways to become grid-independent; the closer a data center is to its power source, the better.

DigitalBridge CEO: Data Centers To Run Out Of Power In 2 Years Or Less A power crunch has tightened on the data center industry in recent years as demand has grown.

Yardi is set to become the majority owner of WeWork with plans to bring the company out of bankruptcy and turn a profit. This is an extremely interesting match as Yardi is already heavily involved in WeWork data systems and can produce additional revenues across its service niche in the co-working space. Perhaps most interestingly, Yardi has a bird’s eye view across office and residential property segments and appears to be voting that coworking will be a growth player benefiting from new work patterns.

Why The 'Strange Marriage' Of WeWork And Yardi Makes Perfect Sense While not a household name, industry experts say Yardi may be the right fit for a recovering WeWork.

For the first time since February of 2022, the national average for U.S. apartment occupancy increased month-over-month to 94.2% in April. Resilient apartment demand in the U.S. produced record net absorption of over 100,000 units in Q1 2024. Rental housing feels … ok.

Apartment Occupancy Ticks Up in April April’s positive occupancy increase highlights strengthening apartment demand is carrying forward, according to RealPage.

Tides Equities continues to make news with their search for preferred equity. They become one of the more watched examples of syndicators with late cycle investments playing for time. Let’s be honest: government stimulus, inflation, and the Fed have just hammered these folks and many others.

Tides Equities Preferred Equity Deal Could Scrap Original Investors The firm's $69M deal could leave original investors with little to no returns on a 7,300-unit portfolio.

New data center development is challenged: 1. lead times to get custom cooling systems are five times longer than a few years ago, 2. delivery times for backup generators are now as long as two years, 3. power to meet the needs of AI microchips is hard to find.

Why the AI Industry’s Thirst for New Data Centers Can’t Be Satisfied The lead time to get custom cooling systems is five times longer than a few years ago, and delivery times for backup generators have gone from as little as a month to as long as two years.

Older data centers are becoming obsolete due to the infrastructure needed to support AI uses. And the cost to redevelop most data centers is higher than new development. Land will be needed.

AI Is Making Older Data Centers Obsolete, Yet Upgrades Are Rare Older data centers can't support the IT equipment for cutting-edge applications like generative AI, but it rarely makes sense to upgrade legacy facilities.

U.S. Industrial leasing dropped 70% YoY even as we continue to add more inventory this year than pre-pandemic. Big players are putting on the brakes but we expect some strain before seeing a rebound in fundamentals in many markets.

U.S. Industrial Leasing Plunges In Q1 As 'Recalibration' Continues As leasing slows, developers are reducing their expansion plans and preparing for lower rents.

Wage growth has topped rent growth for 16 straight months, paving the way for strong renter demand and more rent growth stability.

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The office landscape is changing in coastal US cities. Tech companies – previously voracious users of Class A space in our biggest markets - are re-evaluating needs due to an increase in remote work and hiring slowdowns. We are skeptical that much happens to reverse this trend in the short term.

Big Tech Is Downsizing Workspace in Another Blow to Office Real Estate The pullback marks a sharp reversal after years when companies had been bolstering their office footprints by adding millions of square feet of space.

Déjà vu all over again: Peter Linneman explains that the Fed is looking at inflation incorrectly and holding onto higher rates too long. While painful, Linneman still believes there will be 75-200 bps of rate cuts this year. We don’t know what to believe anymore.

Walker Webcast: Peter Linneman Calms Inflation Fears, Examines Economic and Real Estate Trends - Connect CRE The timing of the April 10, 2024, Walker Webcast was notable. It took place just hours after the Bureau of Labor Statistics released its Consumer Price Index Report. The CPI generated blaring headlines announcing that year-over-year inflation stood at 3.5%. However, webcast host W***y Walker (Chairm...

The gap in YoY rent change between urban and suburban apartments has narrowed to levels that were considered normal pre-pandemic, but urban occupancy still lags. Improvement in CBD office attendance would certainly help.

Urban Cores No Longer Grossly Underperforming Suburban Counterparts In a typical, pre-pandemic world, urban core submarkets generally underperformed their suburban counterparts by a small margin. Urban core occupancy typically fell less than 100 ba...

CBRE: Primary data center markets continue to strengthen, with 83% of the 3,077 MW under construction pre-leased and vacancy sitting at 3.7%. We see an inevitable supply shortage looming with insatiable demand and constraints from power generation on the horizon.

North America Data Center Trends H2 2023 Technological innovation is driving record demand despite power constraints.

Blackstone makes a $10 Billion bet on U.S. multifamily, claiming that they see the pillars of a real-estate recovery coming into place. We share their positive macro outlook for the apartment sector and agree it’s time to get busy.

Blackstone Making $10 Billion Multifamily Purchase, Going on the Real Estate Offensive The acquisition of AIR Communities is Blackstone’s largest transaction in the multifamily market.

Equinix, the world’s largest data center REIT has agreed to buy nuclear power from a firm backed by Sam Altman which plans to manufacture small modular nuclear reactors (SMRs). We should be hearing a lot more about SMRs in the future.

Data Center REIT Equinix Inks Deal To Buy Nuclear Power From Sam Altman-Backed Firm Equinix plans to buy up to 500 megawatts from Oklo, a modular nuclear reactor firm that is working to go public through a S**C deal.