Limon Net Lease Group

Archives for January 2022

The Top 3 Risk Factors For Commercial Real Estate Investors

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Risk of COVID Continues to Decline, But Impact Still Lingers

  • Infections continue to weigh on recovery of Retail, Office, Seniors Housing and Hotels, primarily in urban centers
  • However, COVID-fueled behavioral changes boosted Self-Storage and Apartment demand

Labor Shortage Weighs on Economic and CRE Recovery

  • Property types with large staffing needs, like Sr. Housing and Hotels, have felt the biggest impact
  • MOB, Industrial and Retail face indirect risk if tenants can’t find staff and cut back on space demand
  • Labor shortage putting upward pressure on wages, supports higher rents for Apartments and Self-Storage

Inflationary Pressure Is Real and Rising, Likely to Persist

  • While Office and Retail often have longer leases, they can include escalator clauses tied to inflation
  • Apartment and Self-Storage can adjust rents once or more a year, providing higher inflation resistance
  • Hotel’s capability to change rates daily make it the most resilient against inflation

*Through November; CPI through December; 10-Year Treasury through January 26
Sources: Marcus & Millichap Research Services, Federal Reserve, BEA, BLS

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What is the CRE Investment Outlook for 2022?

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Investment climate in 2022 expected to be very active

Apartment investors, among others, report a large amount of capital looking for deployment

 

Lack of for-sale inventory driving strong competition for assets

As a result, property values are seeing aggressive upward pressure and cap rates at record low

Private investors who’ve seen tremendous performance over the last cycle, may consider rotating capital from lower-yielding asset classes into those with strong returns

2022 Investment Forecast Report series provides an excellent opportunity to engage investors on this very topic

Agents can use these tools to discuss diversification strategies, understand client investment objectives and position as a trusted real estate advisor

Watch the Video Below

Download the Full Report Here

Research Report | Retail Sales January 2022

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Retail Sales Have Tailwinds Heading into 2022 Despite Soft End to 2021

  • Consumers step back in December. Core retail sales dipped 2.5 percent last month as spending that usually occurs closer to the holidays was spread over a longer shopping season.
  • Shift in holiday plans impact retail sales. The rapid spread of COVID-19 last month altered travel schedules for a sizable portion of the population. Family visits and vacations were put on hold, which eroded spending.
  • Seasonal challenges account for soft spending performance. Fewer people are generally able to move during the holiday season, which contributed to a decrease in some sectors.

Outlook Raises Questions This Year

  • Key issues to watch in 2022. The largest threat to retail sales this year is inflation, which is nearly at a 40-year high.
  • Labor market also presents challenges. Although 2021 marked a historic year in job growth and saw the unemployment rate decline to 3.9 percent, several questions on the overall strength of the market remain.

*Through December; savings deposits and money market funds through November.
Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; CoStar Group, Inc.; Federal Reserve; U.S. Census Bureau

Download the Full Report Here

Forecast Report | 2022 Multifamily Markets

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Will Multifamily’s Record Performance Carry into 2022? Trends, Insights, and Outlook for 46 Markets

The health crisis unlocked a wave of changes to the economy and housing market that transformed the multifamily investment landscape. To help investors adapt to and capitalize on the unprecedented climate, the 2022 Multifamily Investment Forecast offers deep insight on the performance, investment and financing landscape for the coming year.

Key Features Include:

  • 2022 economic, housing and demographic outlooks
  • Apartment market index rankings
  • Supply and demand forecasts for every market

Click to Download Full 2022 U.S. Multifamily Investment Forecast Report from Marcus & Millichap Research Services

What is the 2022 Inflation Outlook and Impact for Real Estate Investors?

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Inflation rate (CPI) hit 7.1% in December, a 40-year high

Three primary factors are driving inflationary pressure, and will likely not be resolved in the short-term:

1. Supply Chain:

  • Disrupted supply chains is restraining the amount of goods and raw materials available to the market
  • At the same time, consumption is elevated with inflation-adjusted retail sales up 16% from pre-COVID
  • This is supply-demand mismatch is stoking prices and putting upward pressure on inflation

2. Labor Shortage:

  • Record 4.3M shortfall of job openings and people looking for work creating wage pressure
  • Rising wages is a “sticky” form of inflation and will likely stay with us even after the shortage is resolved

3. Housing Shortage:

  • Lack of affordable housing options is putting upward pressure on rents and home prices
  • Rapidly rising housing costs will keep inflation elevated over the short to mid term

Additionally, the Federal Reserve has signaled a more hawkish stance in an effort to relieve elevated inflation pressure. For CRE investors, this could mean rising interest rates over the short term, as the industry’s inflation-resistant reputation draws new capital.

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Employment Research Brief | January 2022

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Labor Market Tightens Further, Fostering Upward Pressure on Wages, Interest Rates

  • In rare feat, unemployment drops below 4 percent. Employers added 199,000 personnel to payrolls in December, below the 2021 monthly average of 537,000 jobs, while the unemployment rate fell 30 basis points to 3.9 percent.
  • Recent hiring indicative of strong industrial space needs. The transportation and warehousing sector grew by 19,000 personnel last month, raising the total headcount to 218,000 above the February 2020 level.
  • Office tenants continue to hire staff; in-person return delayed. Ongoing job growth in professional and business services has lifted the traditionally office-using sector close to its pre-pandemic headcount.

Additional Trends:

  • Labor participation subdued despite low unemployment. While the unemployment rate has contracted to just 40 basis points above the pre-pandemic rate, labor participation has not fully recovered.
  • Falling unemployment bolsters Fed’s policy change. Job openings in excess of job seekers and a sub-4 percent unemployment rate imply the economy is essentially at full employment for the current pandemic situation.

Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics

Download the Full Report Here