There is no doubt that COVID-19 is creating a significant impact throughout the world, both in the short and long term, and the disruption to the supply chain is immense. We are seeing a number of major trends along the supply chain and related industrial real estate areas resulting from the COVID-19 pandemic. First, some good news. China, which is the source of many supply chains, is starting its comeback. As of this writing, factory production in the country is anywhere from 50 to 80 percent back online with some reduced staff (based on recent ISM survey); up from a standstill leading up to the Jan 25th Chinese New Year (CNY) and weeks after. Obviously, the prolonged gap in product flow created from CNY and the outbreak of COVID-19 created a one-two punch lasting 8 to 12 weeks. In addition to reevaluating the shutdown for CNY altogether, many companies were already shifting as much sourcing as possible away from China to other countries in Asia and India, according to a very recent supply chain leader study conducted by the Supply Chain Leaders in Action. According to a survey performed by Institute of Supply Management, 62 percent of manufacturers are seeing delayed orders and 53 percent are having hard time getting information from China. Additionally, 48 percent of manufacturers are seeing slower logistics in China as well as delays at ports while 57 percent report longer lead times from China. Click to read more at www.rejournals.com.
(The Center Square) – Most people think of oil or cattle when they think of Texas. But real estate has been an undervalued frontrunner in Texas’ economy. Commercial real estate construction and investment were higher in Texas last year than in any other state, generating more than $54 billion according to the National Association of Industrial and Office Parks (NAIOP). NAIOP measures commercial real estate construction and investment, estimating how much it contributes to the economy in terms of both finances and labor. Their report shows that in 2019, investment and development of office, warehouse, industrial and retail buildings sustained 9.2 million jobs and contributed more than $1 trillion to the U.S. economy. “The U.S. economy is in nearing 11 years of expansion, growing consistently since July 2009 and making it the longest in American history,” Thomas Bisacquino, NAIOP president and CEO, said in the new report. “Despite slowing global and U.S. fiscal growth, the economy’s expansion is expected to extend beyond 2020. This is good news for our industry, as steady demand will drive new construction and development.” Click to read more at www.thecentersquare.com.
In light of these down markets, let’s say this virus launches us into a recession. A recession not caused by overblown real estate values. What do private equity/debt funds do in an environment like this? How does the strategy change? Is it a just wait it out and see? This doesn’t seem like a situation where there’s be boatloads of NPL portfolios hitting the market, maybe not as many distressed properties to buy up, but I guess I could be wrong there. What’s the play? Maybe someone who was in repe during the dotcom bubble could enlighten us on RE plays through that crash. Click to read more and comment at www.wallstreetoasis.com.
The new decade brings unique challenges and opportunities for CRE investors. The U.S. is well into the longest economic expansion in history, and the U.S. economy, financial markets, and capital markets are forging ahead into 2020. Forging ahead can mean either “moving slowly and steadily” or “moving with a sudden burst of speed.” While the former definition is applicable to current economic growth and overall CRE space market fundamentals, the employment situation, industrial sector performance and secular changes impacting the CRE market are aligning with the latter definition. Economic data, in general, show support for continuing economic growth in 2020, albeit at a modest pace. Click to read more at www.nar.realtor.
The following is an overview from REDNews Texas Net Lease & 1031 Summit which was paneled with single-minded experts, focusing on the net lease market in Texas and around the United States. It’s a segment of the industry that has evolved considerably over the past two decades, according to Net Realty Advisors partner Gavin Kam. Back in 2001, Kam said he had just started at Marcus & Millichap, joining as a retail agent. “One day, the office manager came up to me asked, ‘Have you ever heard of triple net deals?’ Of course, I said, ‘No.’ He handed me a list, some research, and instructions, then said, ‘Why don’t you take a look at this list and start calling?’” recalled Kam. Nineteen years on, it’s clear those phone calls paid off. His company, Net Realty Advisors, specializes mostly in multi-tenant investment sales. Kam told the summit’s attendees that he’s watched net leases go from a tool used institutionally by retailers to something more developers and brokers are utilizing. Click to read more at www.rednews.com.
Nonfarm payrolls grew far more than expected in February as companies continued to hire leading into a growing coronavirus scare. The Labor Department reported Friday that the U.S. economy added 273,000 new jobs during the month, while the unemployment rate was 3.5%, matching its lowest level in more than 50 years. An alternative measure of joblessness that counts those not looking for work and holding part-time jobs for economic reasons edged higher to 7%. The January and February gains tied for best month since May 2018. Economists surveyed by Dow Jones had been looking for payroll growth of 175,000 and a 3.5% jobless level. Average hourly earnings grew by 3% over the past year, in line with estimates, while the average workweek, considered a key measure of productivity, nudged up to 34.4 hours. There was more good news for the jobs market: The previous two months’ estimates were revised higher by a total of 85,000. December moved up from 147,000 to 184,000, while January went from 225,000 to 273,000. Those revisions brought the three-month average up to a robust 243,000 while the average monthly gain in 2019 was 178,000. Click to read more at www.cnbc.com.