In the News

13th Floor Homes has initiated the construction of Marina Landings, a luxury gated community in Fort Lauderdale, Florida, featuring 34 single-family homes. The project addresses the challenge of scarce available land in South Florida by repurposing infill sites. The development, located near the airport and downtown, offers homes starting in the low 1-millions, with various floor plans, and is expected to be completed in 2024. The demand for single-family homes in the region has led the company to expand its presence into various Florida submarkets.

Invitation Homes, the largest owner of single-family rentals in the US with around 85,000 properties, is facing challenges in finding properties to purchase. Despite a strong demand for rental homes, the company struggles to acquire suitable properties, often getting outbid when they do find something that fits their criteria. They are turning to homebuilders to strengthen their portfolio and have formed partnerships with them to build new homes. Invitation Homes reported revenues of $618 million in the third quarter, with a robust leasing market and rents returning to historical norms. They are also selling older, non-core properties to fund new acquisitions, with a construction pipeline of 1,931 homes in partnership with third-party builders. The company is well-positioned with ample liquidity for potential merger and acquisition deals in the future.

Rite Aid, a pharmacy chain, has filed for Chapter 11 bankruptcy protection due to significant debt and opioid-related litigation. The company received a commitment of $3.45 billion from creditors and lenders to support its operations and financial restructuring. The bankruptcy is expected to result in the closure of hundreds of Rite Aid stores. The filing will address the opioid-related lawsuits and help the company optimize its store footprint, with plans to close underperforming stores. Jeffrey Stein has been appointed as the new CEO and chief restructuring officer. Rite Aid has been struggling financially, with ongoing losses and a substantial debt burden.

In 2023, the real estate markets in Sarasota and Fort Myers have shown resilience with minimal drops in sales volume. The region achieved approximately $735 million in total sales volume in the third quarter, surpassing pre-pandemic levels. Sarasota accounted for the majority of investment volume at $1.3 billion year-to-date. The multifamily sector performed well but didn’t reach the peak recorded in the second quarter of 2022. Office transactions declined, and industrial investments have remained consistent, with a strong third quarter. The retail sector fluctuated, with the third quarter being the weakest in five years. Private buyers and owner-users continue to dominate the market, contributing to a steady flow of deals, especially in the industrial and multifamily sectors.

Marriott International and Hilton are capitalizing on the growing demand for hotel-like homes by expanding into the unique segment of hotel-branded residential developments without the hotel component. Traditional sales of condo-style branded residences that are part of luxury hotel developments have driven project funding and appealed to investors in vacation homes and international real estate. Stand-alone branded residences, without the hotel, are becoming popular among luxury travelers who seek the benefits of a luxury hotel brand without the risks of hotel development. Marriott, with 128 branded residential developments globally, has 17% that are stand-alone, and Hilton is about to launch its first stand-alone private residence project. Stand-alone branded residences offer private homeowners luxury amenities like concierge services and security. However, these stand-alone residences are intended for sale, not for hotel rental use, as hotels still cater to their loyal customer bases co-located with hotels.

Florida’s multifamily real estate sector has experienced significant growth in development and investment over the past few years due to population growth. However, rising insurance costs, driven by hurricane-related damage and increased reinsurance rates, are now posing challenges for the industry. This surge in insurance expenses, averaging around $2,000 per unit, has led to a potential 10% loss in property value, particularly impacting older properties and wood-frame structures. The situation is seen as an urgent issue that needs to be addressed at the state level to support the multifamily sector’s sustainability.

Florida has overtaken New York as the second most valuable housing market in the United States, with its residential property values surging by $160 billion over the year starting in June 2022, according to research by Zillow. This shift is attributed to increased demand for living in Florida, driven by factors such as the pandemic-induced exodus from high-tax and high-restriction states. California remains the most expensive residential real estate market, although its property values decreased by 3.3% since June of the previous year. Overall, Florida’s housing stock is now worth $3.8 trillion, surpassing New York’s $3.69 trillion, with Miami emerging as one of the top five metropolitan areas in terms of housing stock value. New York City still holds the top spot, with its real estate valued at $4.24 trillion, followed by Los Angeles with $3.71 trillion.

VanEck’s new exchange-traded fund (ETF) tied to office real estate investment trusts (REITs) faced an immediate setback when one of its holdings, W.P. Carey, announced its exit from the office sector, causing a 7% drop in the ETF’s share values just one day after its launch. Despite this setback, some industry experts, such as Sher Hafeez from JLL Securities, remain optimistic about a potential long-term rebound in office REIT valuations. VanEck maintains its confidence in the office sector’s recovery prospects, emphasizing the benefits of its ETF structure for diversified exposure to the category. The office sector faces challenges, but it also presents opportunities, with signs of improved performance in certain segments and shifting investor attitudes.

The impending restart of student loan payments on October 1, impacting 43 million borrowers with $1.6 trillion in outstanding debt, raises concerns about its effect on consumer spending, a key economic driver. While the Department of Education’s income-driven SAVE plan offers relief for many borrowers, the Federal Reserve’s interest rate hikes and falling median household incomes are already straining consumers. Rising delinquency rates on credit card and auto debt further compound the challenge. Although shifting budgets toward student loan payments may cause a modest drop in personal consumption expenditures, consumer spending remains pivotal for the economy’s stability. Additionally, the housing market faces ongoing difficulties, marked by high mortgage rates and low inventory, as the National Association of Home Builders Housing Market Index declines for the second consecutive month.

Amazon has plans to double the number of same-day delivery centers it operates, which are seen as the fastest and cost-effective fulfillment mechanism for the company. These facilities are designed to streamline the process of getting items from order to delivery readiness in as little as 11 minutes. Amazon’s same-day delivery centers are strategically located based on population density, with some of the most populous metropolitan areas having multiple centers. The facilities are typically located in buildings with high ceilings, averaging 33 feet, allowing for tall racking systems to accommodate a large volume of merchandise. The company focuses on properties ranging from 100,000 to 225,000 square feet in size. The expansion of these facilities is expected to enhance Amazon’s delivery speed for customers.

Decline in Office Values Outpaces Great Recession, Blackstone-Owned New York Office Building Goes Up for Sale, Silver Star To Sell Properties Tied to Loan By Mark Heschmeyer and Nicole Shih, CoStar News, September 21, 2023 | 10:19 A.M. Decline in Office Values...