Infrastructure is often one of the biggest impacts on commercial real estate. Whether it’s accessibility, water usage or increasingly high speed internet access. Elon Musk’s Twitter announcement on Thursday directly impacts the former. According to Musk, he just received "verbal government approval" to build an underground Hyperloop transit network connecting New York, Philadelphia, Baltimore and Washington DC. The Hyperloop would propel users at 200 km/h and cut the trip from New York to DC down to about half an hour. It’s still a little unclear what “verbal government approval” means, whether it’s approval to submit a proposal or approval to start digging, but, either way this is big news.
Where we are at in the commercial real estate cycle is unclear. Some say we still have runway left in the growth market, others say we’re past the peak and are headed for a recession. This uncertainty has caused a noticeable slowdown in commercial lending. But, federal regulators recently issued a proposal aimed at providing some lenders sizable relief. The proposal from the FDIC, would increase the threshold at which commercial real estate transactions require an appraisal. By raising the threshold to $400,000 it will exempt 28 percent of commercial transaction from needing appraisals. Martin Gruenberg, Federal Deposit Insurance Corp. chairman said, "Bankers in rural parts of the country [have] expressed significant concerns with delays in completing real estate transactions due to a scarcity of appraisers in those areas."
The “Internet of Things” and virtual reality has been hailed the next big thing in commercial real estate. Well, Google has quietly been making that a reality over the last two years with Glass Enterprise Edition (EE). Alphabet, the parent company of Google, has sold hundreds of second generation of Google Glass to companies like GE, Boeing, DHL and Volkswagen. And, those companies have seen a huge difference in their productivity thanks to augmented reality digital overlays. “In our first test in quality, our numbers were so high in the value it was adding that we actually retested and retested and retested,” said Peggy Gulick, director of business process improvement at AGCO, a Glass EE testing company. It seems like almost every aspect of commercial real estate has an application for Glass, from augmented reality for architecture, hands free access build specs for construction or to real time asset information as a broker.
So Amazon bought Whole Foods and now they are set for food distribution services in basically every affluent neighborhood in America. Cool, so what does that mean for the property owners where Whole Foods is the anchor tenant? According to a recent article by Forbes, Amazon will account for 50 percent of all online sales by 2021, and Whole Foods has some of the highest sales per square foot. While the sale removed uncertainty of Whole Foods’ future, it hasn’t immediately improved the property value. According to Colliers International Vice President, Tom Nelson, “Stock prices were impacted, but cap rates weren’t changing, and centers are still highly valued on cap rates.”
At this point everyone knows about the massive wall of CMBS loans issued between 2006 and 2007 set to mature this year. With banks tightening their underwriting standards, owners are being pressured to offload properties at least six months ahead of their maturity date. According to the article, Trepp predicts roughly $41.7B in CMBS debt is set to mature between June and November. This means a lot of property will be hitting the market that need to move quickly. Does this mean we’ll be seeing a shift to a buyer’s market in the second half of 2017?