Office Space in a Post-COVID World

Posted by Jack Schmittlein on Sep 26, 2020 10:54:42 AM

Amid the COVID-19 pandemic, almost every aspect of our lives--both work and social--changed in the blink of an eye. And companies now face a question that would have been inconceivable a year ago: do you really need an office?

Office space will forever be different after this pandemic and must adapt to meet the needs of the new reality of in-person collaboration. From changing work habits to rethinking the needs that office spaces will serve, offices will fill the gap that technology cannot in what will become a blended work-from-home dynamic. 

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Topics: Market Update, Office

5 Must-Reads for the CRE Industry [August 2020]

Posted by Alex Dimitroff on Sep 1, 2020 6:33:55 PM

1.  US No Longer the Global Leader for CRE Investment

“In normal periods the U.S. is the largest, most liquid region for commercial real estate deal activity worldwide. In the second quarter, however, Europe surpassed the U.S. as a hub for investment. Trends into July are not looking favorable for the U.S.” (Real Capital Analytics, 8/31)

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Topics: Market Update, Investment

Commercial Bridge Lending vs. Hard Money Lending

Posted by Brittany Vo on Aug 11, 2020 9:06:44 AM
Discover the similarities and differences between these two commercial financing scenarios.

In the world of commercial real estate finance, many people use the terms "bridge lending" and "hard money lending" interchangeably. However, there are differences between the two types of financing and those differences can have a major impact on the way your loan is structured and how the approval process works.

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Topics: Market Update, Bridge Loans, Investment

5 Must-Reads for the CRE Industry [July 2020]

Posted by Alex Dimitroff on Jul 31, 2020 3:19:52 PM

1.  Lending Could Fall Almost 60% This Year, MBA Forecasts

“Bankers expect commercial real estate loan originations to drop 59% in 2020 because of the economic fallout from the coronavirus pandemic. Lenders are forecast to complete $248 billion of loans backed by income-producing properties — down from 2019's record volume of $601 billion, according to a new projection by the Mortgage Bankers Association.” (CoStar – subscription required, 7/20)

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Topics: Market Update, Investment

5 Must-Reads for the CRE Industry [June 2020]

Posted by Alex Dimitroff on Jun 30, 2020 12:55:41 PM

1.  Commercial Real Estate Sales Fall 24% to $39.1 Billion

“The repeat sales of $39.1 billion for the first five months of 2020 fell 24.2% from the same time a year earlier. This is the first look at the year's commercial real estate pricing trends, calculated by using the price change from the pair of first and second sales of properties sold multiple times. The indices are based on 538 repeat sales in May and more than 227,324 since 1996.” (CoStar - subscription required, 6/25)

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Topics: Market Update, Investment

Impact of Supply Chain Disruptions in Industrial Real Estate

Posted by Cesar Castro on May 15, 2020 11:33:39 AM

COVID-19 has significantly impacted the global economy as countries took sweeping measures to combat the spread of the virus. Halts in production, logistics activity, and consumer demand have had outsize effects on the globally intertwined supply chains many companies have built. Zencargo, a logistics startup, predicts supply shocks will generate $700 million in losses for the U.S. retail industry alone in the period from March 9 to April 20. This has led many supply chain experts to formulate risk mitigation strategies accounting for a variety of factors from labor costs, to capital investments. Many companies had one pain point in common: high supply chain concentrations in China. The effects of production halts are still being felt across many sectors. It is likely this crisis will force companies to assess the risk of reliance on one source for so many inputs and finished goods. One potential effect is the increased buildup of manufacturing and distribution capacity in the United States. A large-scale shift to domestic buildup has important real estate implications, particularly for industrial properties. From modifications to existing properties to entirely new development of custom facilities, the new demand could represent a strong opportunity to generate returns for investors that can lead and respond to these changes.

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Topics: Market Update, Investment

Underwriting Commercial Real Estate in the Era of COVID-19

Posted by Charlie Dunlap on May 6, 2020 2:12:30 PM

The COVID-19 crisis has brought significant stress to the commercial real estate financing market resulting not only from the obvious effects of putting the U.S. economy on hold, but also because commercial real estate and social distancing don’t mix.

The inevitable result will be missed rent, forbearance, and potential defaults by tenants. Landlords will need to accept this and work with tenants or risk sending tenants into bankruptcy. This will create unoccupied spaces in their buildings and destroy relationships with otherwise good tenants.

When crises hit, the biggest challenge in underwriting commercial real estate is in sorting out which issues are brief interruptions, and which will have long-term impacts on value (i.e.  understanding the difference between a suspension of the rules and a changing of the rules). For example:

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Topics: Market Update

5 Must-Reads for the CRE Industry [April 2020]

Posted by Alex Dimitroff on Apr 30, 2020 10:40:51 AM

1.  COVID-19 Real Estate Sentiment Survey and the Truncated V-Curve, with a Tail...

“As the current coronavirus pandemic reaches a (hopefully) peak in the U.S. and the extent of the devastation to the economy comes into focus – 22 million unemployed, thus far, with downstream impacts to everything from retail sales, sporting events, the price of oil, and the stock market (regardless of a mini bull market in the past week or so) – we have begun to think about what the recovery is going to look like, which real estate segments will be the winners and losers in the “Great Lockdown,” and what is happening in the real estate capital markets? And so we asked our client base of real estate market professionals to tell us what they thought, in this special edition COVID-19 Real Estate Sentiment Survey.” (RCLCO Real Estate Advisors, 4/21)

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Topics: Market Update, Investment

5 Must-Reads for the CRE Industry [March 2020]

Posted by Alex Dimitroff on Apr 9, 2020 8:36:33 AM

1.  Fed Announces Unlimited Bond Purchases, Will Buy Apartment CMBS

“In an extraordinary move to keep credit lines open, the Federal Reserve announced Monday morning that it would not put a cap on its purchases of Treasury and mortgage securities.” (GlobeStreet, 3/23)

What you need to know:
  • The Fed will also begin purchasing CMBS issued by government-sponsored entities (i.e. Fannie Mae, Freddie Mac) that will help stabilize multifamily properties.
  • The Fed also maintained the possibility of including private label CMBS and adding other asset classes in the future.

Read the full article here.

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5 Biggest Mistakes Sponsors Make In Commercial Real Estate

Posted by Marc Grayson on Dec 10, 2019 11:34:29 AM

“Learn from the mistakes of others.  You can’t live long enough to make them all yourself.” 

Having spent my entire career in commercial real estate (CRE), I have made more than my share of mistakes and witnessed countless others.  There are literally thousands of decisions made in any commercial real estate transaction.  Many of them are so small they are virtually unrecognizable.  Early in my career, I was introduced to a very simple chart that I have grown to rely upon when making capital allocation decisions.  It very simply shows that as time elapses, your ability to influence the outcome diminishes, and the cost to influence that outcome grows.     

In simple terms, a dollar spent early in the process has a much greater influence on an outcome than a dollar spent later in the process.  I’ve seen this simple truth repeatedly played out in my career.  Not enough invested up front can be the difference between profit and loss.  This concept leads us to the first mistake CRE sponsors[1] make: undercapitalizing the business plan.

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Topics: Investment, Investors, Sponsors