MRA Group is transforming the former DuPont campus in Wilmington; this campus will now be the Chestnut Run Innovation and Science Park. This is a $1 billion redevelopment of 164-acres. They are constructing new buildings as well as renovating buildings already on the campus. Most recently, they have secured $63 million in financing primarily for the ground-up construction of a 102,000 square foot building that is going to be used for manufacturing specialty chemicals. Through this process of redevelopment, the MRA Group has received funding from many partners in the banking industry, but this funding is different than other funding. The majority of the $63 million came from a $50 million C-PACE loan which is only provided when certain sustainability measures and energy efficiency matters are included in the construction.
Office Tenants Are Renewing Leases—but for Far Less Space – WSJ>>
The COVID-19 pandemic in 2020 has changed the way companies and people go about their work week and where they are working. The remote-work environment has been a huge factor of the slump that is occurring in the commercial, office-space market. Currently all over the U.S., companies are signing leases for buildings, but they are downsizing. Having companies downsize in office space is another factor as to why the U.S. office vacancy rate has increased to 13.2% from 9.5% vacant before the pandemic. CoStar, a real estate data analyst company, is forecasting this vacancy rate is going to keep increasing and will be more than 17% by the end of 2026. As newer companies are forming in the U.S., they are allowing for more flexible work schedules, with part of or the entire week being a remote location for work. As these companies come in and the older companies continue to move out, this will lead to more and more vacancy in office space, leaving landlords struggling.
For the first time in over eight decades, the Southern California region is being hit by a tropical storm, causing flash floods and mudslides, and leaving homes and businesses without power while having schools second guess staying open. As of Monday August 21, 2023, there are 58,142 homes and businesses without power across California, according to PowerOutage.us. Southern California school districts and universities are shutting down as well as staying open through the tropical storms. LA’s Unified school district, which is the nation’s second-largest school district, announced that all its schools will be shut down on Monday August 21, 2023. But when it comes to the University of Southern California, they are only dealing with isolated flooding, so they plan to stay open and get the Fall 2023 semester started on time, as scheduled.
Westfield Lands $925M Loan for Century City Mall – Commercial Observer>>
Unibail-Rodamco-Westfield is an owner, developer, and operator of premier shopping centers in the United States and in Europe’s main capital cities. On August 17, 2023, Unibail-Rodamco-Westfield were able to receive a loan of $925M from the collaboration of three banks: Bank of America, JP Morgan, and Morgan Stanley. This massive loan is set to close in order to refinance the Westfield Century City Mall, which is one of the top shopping centers on the West Coast. This mall was evaluated to be worth $1.94 billion with 95% of the mall being leased; additionally, a $1 billion renovation was completed on the mall in 2017. The reason that this is one of the top malls on the West Coast is because the three anchor tenants, Macy’s, Bloomingdale’s, and Nordstrom, were able to generate $200 million in sales in a one-year period; these are three stores of the total 173 stores in the mall.
A Bright Spot in Commercial Real Estate: Retail Shops – WSJ>>
Despite the rise of Amazon and online shopping, the demand for retail real estate is sky rocketing. With high interest rates and inflation pressures, the office-space market is struggling, but these factors are not scaring the retail industry. The retail industry is a booming market with the retail availability rate at a record low of 4.8% and the asking-average rent in the U.S. being more than $23 a square foot. This booming retail market is not all retail, though. The suburbs have seen the most impact due to remote work and suburbanization, leading to more people visiting local shops during the work week. The retail industry in the middle of large cities have had to lower rents to be able to hold tenants because of the impact of COVID-19. As much as retail has grown and been booming overall, with a 6.3% increase in rent since the second quarter of 2020, low-end enclosed malls are on the edge of failing completely because the store owners are moving to the suburban areas and having their own stores in the open-air with their signage larger and higher, making them more visible.
Wall Street Is Ready to Scoop Up Commercial Real Estate on the Cheap – WSJ>>
With vacancies becoming more and more relevant in the commercial real estate industry, especially in the office space, Wall Street firms are fundraising billions of dollars to but these properties at a fraction of the original price. Firms like Goldman Sachs, Cohen & Steers, and BGO are currently raising billions of dollars to scoop up the distressed assets that current owners are struggling to keep running and stay profitable. These prices have fallen so much, so quickly because of the interest-rate spikes and the slow rate of return to office, leading to vacancies becoming more prominent in the office sector. An example to show the prices of this real estate industry are dropping is, a downtown San Francisco office tower recently sold for $41 million to a developer, yet it was bought for $107 million in 2014.
Record Miami Land Sale Collapses Amid Commercial Real-Estate Slowdown – WSJ>>
A prime 15.5-acre waterfront lot in Miami would have been a record deal in Miami this year, but the sale collapsed. This property owned by Genting Malaysia was set to sell for a whooping $1.2 billion, the highest sale ever to be recorded in Miami, but the deal collapsed in June when the group who was looking to buy could not agree on terms and timing with Genting. The South Florida commercial market is continually outperforming the rest of the nation during these times of high interest rates, but these same factors are worrying South Florida buyers for these big deals and are slowing down the market. Another reason sales are slowing in South Florida is because the migration of people to the area is slowing tremendously, even with the business-friendly regulations and taxes.
A year ago, two New York firms, DRA Advisors and KRP Centers, bought the Quartermaster Plaza Shopping Center in South Philadelphia for $100.1 million, and they are already looking to sell. This shopping center is 456,208 square feet with 99.5% of the property leased and allows for 90,000 square feet more of development, which makes this an extremely appealing offer. It’s not often that a property can be bought, turned around the next year and be sold for about $10 million more than it was purchased for a year before. To make this deal even more appealing to a buyer, there is a 1,300-acre planned, industrial logistics and life science hub being developed to the west. To the east is a $250 million development, that is converting a former military clothing factory into a life science campus with restaurants and a hotel. This sale and development are a great sign for South Philadelphia, showing that the city is moving in a positive direction.
Over 6.7 million square feet of new projects underway – The Business Journals (bizjournals.com)>>
Pasco County Florida, in the north Tampa Bay area, is undergoing a tremendous commercial expansion with over 6.7 million square feet of projects kicking off. This massive project is going to include Class A office space, industrial facilities, lab space, manufacturing, and clinical space. This project is a result of the vast growth that is occurring in the new residence and business expansions into the area. Pasco County has approved the Penny for Pasco, which is a $0.01 sales tax increase that is helping fill capital gaps with loans that the developers need for the undertaking of these projects. The Pasco County government and its residents are fully behind this initiative to develop for businesses because the initiative will help to grow and diversify the economy while still allowing for no personal state income tax.