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Good morning, happy Friday. In today’s email: The industrial sector remains resilient despite recent layoffs. Investors are flocking to grocery store-anchored shopping centers. Meanwhile, Two popular Las Vegas hotels are being sold for $5.5B in the largest casino deal of the year. Let’s dive in!
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🎧 Podcast of the Day: In this episode of GlobeSt.com’s Multifamily Visions podcast, property valuation specialist Meghan Czechowski, SVP and head of Apprise by Walker & Dunlop, shares critical information on how the economy could impact multifamily valuations in the year ahead.
THE INDUSTRIAL AGE
US Warehouse Sales Hit a Staggering $72B in 2022
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The industrial sector has yet again proven to be resilient in the face of economic uncertainty and rising interest rates. Development continues to grow with 713.6 MSF under construction and vacancies below 4% nationally.
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Pulling back a bit: Despite all this growth, the industrial sector has still sustained losses. October was the fourth consecutive month of job cuts, adding up to 49,000 layoffs since June. Amazon (AMZN), the biggest employer in the sector, has also delayed or abandoned opening dozens of distribution facilities nationwide, admitting earlier this year that the company hired too many fulfillment center workers in 2021.
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But still killing it: Fortunately, industrial sector sales are still at record levels. According to CommercialEdge, approximately $71.9B in transactions closed this year at an average of $128/SF. Shipping and logistics remain the driving force for the development pipeline, with 350 MSF already delivered this year.
THE TAKEAWAY
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Coast-to-coast: National in-place rents for industrial spaces is at an all-time high, averaging $6.95/SF in October, seven cents higher than in September. Port markets continue to lead the country in terms of rent growth and vacancy rates. In LA, rents rose 9.7% over the last 12 months, while Boston’s rents grew 8.9% in the first 10 months of 2022.
GROCERY GOLD RUSH
South Florida’s Hottest Retail Asset: Grocery-Anchored Plazas
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Investors are flocking to grocery store-anchored shopping centers (in the era of e-commerce at that) because they’ve proven to be one of the most resilient asset classes during economic downturns, securing $13B in sales volumes last year alone.
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Grocery shopping frenzy: Retail plaza landlords have found themselves in a bountiful sellers’ market as investors compete for grocery-anchored plazas. Between June and October, 13 grocery store-anchored properties in Miami-Dade, Palm Beach, and Broward counties sold for a combined $436M (and, in some cases, for $100 more per SF than last year). 735 grocery-anchored plazas were sold in 2021, representing $13B in sales volume.
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Don’t fear, groceries are here: Recession woes have motivated commercial investors to look for properties with dependable rental income and low vacancies. Shopping centers that include grocery stores consistently fit the bill—before, during, and after the pandemic, too. Grocery stores snapped up $803B in sales last year, up 16% from 2019. Supermarkets also drive more foot traffic to surrounding businesses, which gives investors confidence that other tenants can keep up with market-rate rent increases.
THE TAKEAWAY
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Eating good in every ‘hood: Leases for new grocery stores skyrocketed by 200% last year compared to 2019. German grocer, Aldi, led the sector with 88 new stores totaling 2.2 MSF, with plans to add 150 new locations by the end of the year. Publix remains the top grocery chain in Florida, adding 1.3 MSF of new retail last year. Rising interest rates have shrunk the buyer pool for grocer-anchored shopping centers, but demand remains high and will likely stay that way.
CASH OUT
Blackstone Sells MGM Grand, Mandalay Bay Stakes for $5.5B
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Blackstone Inc. (BX) has entered an agreement to sell its 49.9% stake in two Vegas hotels, the MGM Grand Las Vegas and the Mandalay Bay, for $5.5B, making it one of the largest US casino deals this year.
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Deal of the day: Blackstone will be turning over its 49.9% stake in both Vegas hotels to Vici Properties Inc. (VICI), which owns the remaining 50.1% stake in the properties. Assuming the deal closes, Blackstone would receive $1.27B in cash and Vici would assume Blackstone’s share of the $3B debt. The sale is expected to close early in Q1 2023 and would bring Blackstone $700M in pure profit in less than three years.
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Blackstone’s strategy: In response to rising interest rates, Blackstone has been exiting real estate investments with fixed returns and seeking opportunities with growth potential instead. MGM Resorts International’s rent is $300M, with an annual increase of 2%. Blackstone hopes to use the proceeds from the sale to purchase assets that yield higher returns, such as multifamily developments and industrial properties.
THE TAKEAWAY
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When in Vegas… The asset manager had originally purchased the properties in 2020 from MGM Resorts, which allowed MGM to continue operating the casino, while Blackstone acquired the underlying real estate. Blackstone remains bullish on Las Vegas because of its high growth, low taxes, and popularity as a travel destination. Earlier this year, Blackstone also made its most profitable sale of a single asset in the firm’s history after it sold the Cosmopolitan casino and hotel for $5.65B.
📰 Editors’ Picks
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Home sale slump: Contract signings dropped 4.6% in October as pending home sales decline for the fifth straight month and mortgage rates continue to rise.
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Chinese billionaire getaway: After the implosion of the Chinese property sector, a couple that built one of China’s greatest CRE empires has found refuge in a townhouse in Midtown Manhattan.
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Below the mark: Private companies posted 127K jobs in November, well below 190K estimates, and a far cry from the 239K open positions in October.
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Big Cypress Lodge: Die-hard shoppers can stay at this rare hotel inside a hunting and fishing superstore in the shape of a pyramid spanning 535 KSF.
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More defaults to come: Fitch Ratings is projecting that US CMBS loan delinquency rates will increase significantly from 1.89% to as high as 4.5% ahead of an anticipated recession.
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Lawyering up: Florida Attorney General Ashely Moody has filed a civil lawsuit against MV Realty, a Delray Beach-based agency for deceiving customers with misleading contracts.
🤝 Deals & Dealmakers
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Old digs for sale: Major casino operator, Genting Bhd, wants to sell its 16-acre parcel of real estate in Biscayne Bay that was once home to the Miami Herald newspaper.
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Garden State glory: The real estate investment platform 6R Capital Group secured $31.5M in financing to acquire two hotels in New Jersey. Ugh.
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Co-living goes international: Belgian-based co-living firm Cohabs has raised $450M in funding to continue its US and international expansion. Because who doesn’t want roommates?
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Pricey waterfront property: Genting Group, a Malaysian casino operator, is seeking $1B for a 15.5-acre site that offers 800 linear feet of waterfront property on Biscayne Bay.
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Willow’s digital twin: Microsoft (MSFT) has partnered with proptech firm, Willow, a leading provider of digital twin solutions, to link its digital twin platform with Microsoft Cloud.
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South Florida strikes again: Boston-based TA Realty purchased a 12-building, 1 MSF industrial park for $241M in South Florida.
📈 CHART OF THE DAY
ICYMI
What happened last week…
What did you think of today’s newsletter? |
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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.
