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Good morning. US industrial construction has plummeted, with only 1.8% of stock under development, as developers are forced to adjust from pandemic-era highs and balance growing demand with oversupply risks.

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Market Snapshot

*Data as of 12/10/2024 market close.

LOSING STEAM

TOGETHER WITH TRACTIQ

Self-Storage REIT In-Place Rents 15.6% Higher Than Average Advertised Rents

The self-storage industry continues to show resilience in the face of headwinds pressuring the market. 

Each self-storage REIT expressed cautious optimism heading into 2025 while remaining vigilant in operations during a challenging economic and housing environment.

According to TractIQ, existing storage customers continue to show little resistance to ECRIs (Existing Customer Rate Increases), which has become the dominant revenue management strategy.

• Extra Space in-place rates are 26.7% above their advertised rates

• Public Storage in-place rates are 3.0% above their advertised rates

• CubeSmart in-place rates are 19.9% below their advertised rates

Although the ECRI strategy is prevalent across the board, each REIT has a slightly different implementation strategy resulting in premium differences. To learn more, download TractIQ’s Q3 2024 Storage REIT Report.

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• Coastal challenges: East and West Coast housing markets face growing risks of downturns due to affordability stress, foreclosures, and economic pressures, while the South shows resilience.

• Billion-dollar game plan: Lincoln Property Company’s mixed-use development around the Cleveland Browns’ new stadium is projected to drive $1.2B annually.

• Shifting strategies: NYC CRE owners are diversifying by expanding into multifamily, retail, and niche sectors like student housing as they adapt to post-pandemic market shifts.

• Deals that defined 2024: From office leases revitalizing urban hubs to innovative financing and industrial expansions, key CRE transactions in 2024 highlight market opportunities.

• Brookfield’s big bet: BAM acquired an $893M, 8.7K-bed student-housing portfolio at a steep discount, leveraging strong demand near major universities.

• Opportunity awaits: Boardwalk Wealth unveils Jefferson Reserve Phase II, a 96-unit garden-style project offering immediate cash flow, tax benefits, and Opportunity Zone deferrals in a 14-16 month timeline. (sponsored)

• Texas housing boom: North Texas leads US housing growth, but a focus on single-family homes leaves the "missing middle" housing sector struggling to keep pace with demand.

• Disney transformation: Gary Barnett’s Extell Development is repurposing Disney’s former ABC campus on the Upper West Side, filing plans for two residential buildings with affordable housing.

• Sterling Bay stalled: Chicago’s Zoning Committee rejected Sterling Bay’s $250M, 615-unit apartment proposal for Lincoln Park, citing concerns over density, height, and traffic.

• Across the pond: Amazon (AMZN) is negotiating a 1 MSF build-to-suit warehouse in Kettering’s Golden Triangle, revealing renewed logistics investments driven by consumer spending.

• Billion-dollar data push: AVAIO Digital Partners plans to transform a 452-acre site in Virginia into a $3B, 300-MW data center campus, leveraging green power and targeting AI-driven digital demand.

• Industrial investment: Proficiency Capital secured a $32M loan to acquire two Inland Empire business parks totaling 231.7 KSF, reflecting strong demand for small-scale warehousing.

• More storage space: Storage Post refinanced its 9-property, 9,578-unit self-storage portfolio in NY for $115M, leveraging strong market demand and adding to its Class A holdings.

• Walgreens weighs sale: Walgreens (WBA) is negotiating a potential $7.5B buyout by Sycamore Partners. The possible privatization would allow the struggling pharmacy chain to restructure.

• Retail resilience: Consumer wage growth outpaces inflation, but subdued confidence and high construction costs are pressuring retail capital markets.

• Under pressure: Activist investors, including Thor Equities' Joe Sitt, are urging Macy’s (M) to unlock up to $9B in real estate value by creating a separate property unit and spinning off its top chains.

• Discount store sell-off: The liquidation of 99 Cents Only Stores’ 44 owned locations and 333 leased assets generated $168M, spotlighting challenges for dollar stores amid rising costs.

• Doubling down: SL Green (SLG) refinanced 100 Park Ave. with $70M more debt, extended the mortgage maturity to 2027, and secured a 220 KSF lease, boosting the building’s occupancy to 96%.

• Office upgrades: The Irvine Co. is investing $24M to enhance 4 office campuses in Irvine, Costa Mesa, and Newport Beach, capitalizing on a "flight to quality" trend.

• Office-to-resi pivot: TF Cornerstone is advancing plans for a potential residential conversion of the 954 KSF Wanamaker building in Philly amid a foreclosure on Rubenstein Partners.

• Listed for sale: NYC's iconic Pierre Hotel is on the market, offering 189 luxury rooms, retail spaces, and restaurants, attracting investor interest amid a surge in high-profile luxury hotel deals.

• Billion-dollar refi: The luxury Fontainebleau Miami Beach hotel secured $1.2B in financing, including a $975M CMBS loan, $225M mezzanine debt, and $105M equity contribution.

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📈 CHART OF THE DAY