CAMERON JONES SIOR JOINS SVN | VANGUARD AS SENIOR VICE PRESIDENT INDUSTRIAL GROUP

SVN | VANGUARD is pleased to announce and welcome new SENIOR VICE PRESIDENT CAMERON JONES who will be leading our Industrial Product Group in Southern California markets. “We are pleased to have Cameron join the firm. Cameron brings nearly 17 years of commercial real estate experience and expertise in industrial real estate advisory to our team said Managing Director, Cameron Irons.

“Joining the innovative national platform of SVN enables me to seamlessly elevate the client experience on both local and national levels. This strategic move empowers me to utilize my market knowledge, harness cutting-edge technology, value added services and tap into an extensive network of advisors enabling me to continue to create opportunities and solve problems for my clients. I’m also excited to be reunited and work with Cameron Irons our Managing Director, for whom I owe my initiation into the CRE brokerage business some 17 years ago.”

Before joining SVN | VANGUARD, Cameron was a principal and partner at Ashwill Associates commercial real estate brokerage. Cameron focused on industrial product and land redevelopment opportunities, advising owners, occupants, and investors in the acquisition, disposition and leasing of properties throughout Southern California and nationally.

For details about any industrial property needs, contact Cameron Jones at 714.240.7078 or cameron.jones@svn.com.

About SVN | Vanguard

SVN | Vanguard with offices in Orange County, San Diego, and South Los Angeles County is a full service commercial real estate brokerage. We provide Sales, Leasing, and Property Management to clients throughout Southern California. In association with SVN’s 200+ offices nationwide combine a comprehensive national footprint with local decision making, expertise and market-leading execution. All SVN® Offices are Independently Owned and Operated.

On Wednesday, the Federal Reserve published its February 2023 Beige Book. The good news is that the situation hasn’t gotten much worse. Which might not seem like much of a consolation, but given the direction things have been going—more rate hikes seem imminent as a result of Fed Chair Jerome Powell’s congressional testimony.

According to the most recent Beige Book, the economy gained some impetus in the first quarter. This can be attributed to stable manufacturing activity and growth in retail sales, according to a report from Oxford Economics. The consequences for monetary policy, however, are minor because it also suggests that wage pressures and consumer price inflation will continue to moderate.The national outlook for commercial real estate activity was solid, with some growth in the industrial market but persistent stagnation in the office market.

According to the Federal Reserve Bank of Boston, the commercial real estate market in the First District has remained largely stable since the beginning of 2023. The industry still experiences low vacancy and high lease demand, although it has recently leveled off. Food and drink are in reasonably high demand. Large-format retailers and department stores have more open positions. Most contacts anticipated a decline in future commercial real estate activity, with the industrial market outperforming other sectors.

Markets in New York were “little changed” at the beginning of 2023. Office availability and vacancies increased significantly in northern New Jersey and New York. Although vacancy rates and retail rents are both marginally down, development has stabilized to some extent.Market players in commercial real estate continued to report stable current construction activity but observed more weakening of the pipeline as more projects were delayed, canceled, or redesigned, according to a report from Philadelphia.

The demand for non-residential buildings in Cleveland slowed, and new projects are frequently self-funded. Real estate developers also blamed decreased demand on consumers’ growing worry over high interest rates and the status of the economy in general.

The CRE activity in Richmond remained constant from the December data. Rent costs have moderated in several sectors, and overall commercial real estate activity has slowed moderately this period due to lessened construction, leasing activity, investment volume, and asset values.Lower-tier office, multifamily, and some retail CRE development in Atlanta decreased. As more firms compelled employees to return to the office, the negative trend in the office sector slowed further; yet, elevated levels of sublease space remained a barrier to market recovery.

Between December and February in Chicago, not much changed. One contact highlighted substantial interest in retail space that had previously been held by large box tenants as evidence that the need for high-quality space was still strong. Overall, prices and rentals increased a little bit, while vacancies and the number of spaces available for subleasing also increased a little bit.Conditions in St. Louis were inconsistent, with low office demand but high industrial demand. Retail has improved, and for the first time since the pandemic began, several projects are “back in demand”. But a lot of projects are on hold as investors wait out the uncertainties surrounding rate increases.
Minneapolis remained steady since the last report, similar to some other areas, with offices struggling as vacancy rates increased as some significant tenants downsized. Industrial activity also remained robust in this area.The situation for multifamily developers in Kansas City worsened from already poor levels. In addition to interest rates, another issue is the unpredictability of the rents that operators can demand.

In Dallas, apartment leasing is “sluggish,” while occupancy and rental rates have stayed stable. Although many people are worried about the building pipeline, with rising capital costs and stricter underwriting, office demand is “lackluster” and industrial demand is still strong.

In San Francisco, CRE activity remained basically constant. With low rates and many vacancies, office demand is still poor, and according to a survey from Nevada, companies showed more interest in acquiring commercial facilities than renting them.

The February jobs data on Friday and the CPI figures on Tuesday are the next challenges.

We are ready to assist investors with Santa Ana commercial properties. For questions about Commercial Property Management, contact your Orange County commercial real estate advisors at SVN Vanguard.

Consumer spending on goods for personal care, wellness, and consumables has not decreased.

Investment forecasts for the single-tenant net lease sector look strong going forward. As household demand for necessities in retail continues to be robust and retail sales data demonstrates that consumers are spending heavily in areas like grocery, personal care, and wellness products.

In a recent study by leading industry professionals, analysts observed that this behavior has the potential to produce record monthly sales totals across various necessity-based categories throughout the year. These projected record sales will have favorable implications for a single-tenant market which is already on a strong foundation to do fare well.

After an eight-quarter period during which tenants absorbed more than 100 million square feet, availability in the STNL sector was historically limited as 2023 got underway. According to researchers, discount restaurants, grocery stores, and medicine stores all have seen extensive demand. Reports state that “restrained development indicates single-tenant availability may hold firm or compress over the near term if additional vendors grow their businesses and backfill available space,” but the approximately 8.8 million square feet of single-tenant space that was under construction at the beginning of 2023 amounted to just 0.1 percent of the existing stock.

All of this is encouraging for investors since it shows that net-lease retail ownership is stable according to basic spending measures. Sales prices for average STNL properties have increased by about 16% over the last five years, and high-credit tenants and buildings with long-term leases in place continue to be investor favorites. According to Marcus & Millichap analysts, “buyers seeking long-term cash flow and less management-intensive properties may capitalize on high pricing in other sectors and move equity into single-tenant assets with high-credit tenants.”

Our Orange County commercial real estate brokers will help you every step of the way in finding the right commercial real estate investment property, contact us for details.

1. HOMEBUILDING SENTIMENT RISES

According to the latest data from the National Association of Home Builders (NAHB), homebuilding confidence is on the rise. The NAHB/Wells Fargo Housing Market Index (HMI) rose seven index points to a level of 42, its highest reading since September and the most significant monthly increase in the index since June 2013.
Homebuilder sentiment registered at 81 one year ago, but started to fall as mortgage rates and other borrowing costs slowed demand and hindered supply in 2022. While index levels below 50 are considered in ‘pessimistic’ territory, sentiment had fallen to a low of 31 in December.
According to analysts at NAHB, the uptick in sentiment reflects recent incremental gains in housing affordability amid a persistent housing shortage.

2. FED MEETING MINUTES

Despite reducing their pace of rate increases in January, leading to increased market optimism, recently released minutes from the FOMC’s January meeting show that most officials remain “highly” concerned about inflation.
The resilience of labor market tightness has some FOMC members concerned about the upward pressure that wages may continue to place on broader prices. Officials note that while recent monthly data has warranted a slowing of their tightening efforts, they will need “substantially more” evidence of slowing inflation across the board before halting rate increases.
Notably, a “few” members expressed a need to maintain a 50 basis point increase in January. FOMC members have converged in their economic projections over the past several months, so a crack in the consensus could be a significant signal about the uncertainty of our current economic picture.
As of February 23rd, 73% of the market expects a 25 basis point increase at the FOMC’s March meeting, while 27% expect a 50 basis point hike. One week ago, before the minutes were released, expectations at these levels were 85% and 15%, respectively.

3. A BUSINESS TRAVEL REBOUND

A recent report by Placer Labs studying foot traffic activity for the four major business travel sectors — airports, trains/buses, convention centers, and hotels—found that hotels and airports have climbed past pre-pandemic levels. In contrast, trains/buses and convention centers continue to recover.
The report shows hotels have experienced the most robust post-pandemic recovery (using a 2019 baseline). As COVID shut down most travel activity in April 2020, hotel foot traffic dropped an unprecedented 97% from its January 2019 level. The sector recovered as high as 62% above pre-pandemic levels by July 2021.
Airport traffic, which fell by 93% in April 2020, similarly recovered much of its activity by Summer of 2021 but climbed as high as 23% by July 2022.
Foot traffic at train and bus stops as well as at convention centers, has yet to recover 2019 activity levels. In July 2022, train and bus stop traffic hit its post-pandemic peak at -6% below pre-pandemic levels, while convention centers peaked in April 2022, down -11%.
All four major business travel sectors saw activity decline below pre-pandemic levels by the end of 2022, reflecting a broader reduction in business travel expenses amid heightened inflation and recession fears.

4. INDEPENDENT LANDLORD RENTAL PERFORMANCE

The on-time payment rate in independently operated rental units improved by 197 bps between January and February, coming in at 83.4% and reaching a new post-pandemic high, according to the latest Independent Landlord Rental Performance Report by Chandan Economics. It was the fifth consecutive month that average on-time rent collections have held above 81%, the first in the history of the dataset.
Of the states with at least 500 tracked units in the RentRedi-Chandan Economics sample, Colorado holds the highest payment rate in the country in February. 91.4% of independently operating units in Colorado have paid their rent on time this month. Washington (91.1%) and Massachusetts (89.5%) are close behind.
Analyzing performance trends at different rental price points, units with monthly rents below $1,000 continue to register the lowest average on-time payment rate through February, coming in at 82.5%. Upper middle-priced rental units (charging between $2,000 and $2,499 per month) perform the strongest, with a February on-time payment rate of 86.5%. On-time payment rates for all prices rose or remained level from the previous month in February.
2–4-unit rental properties held the highest on-time payment rates of all sub-property types in February, coming in at 84.2% — level with January.

5. INDUSTRIAL ORIGINATIONS FALL

According to an analysis by the Mortgage Bankers Association (MBA), originations fell by 54% in Q4 2022, led by a decline in financing for Industrial projects.
Higher borrowing costs brought forward by the Fed’s monetary tightening have impacted demand levels across all Commercial Real Estate. Still, it has had an outsized impact on Industrial, which experienced the best pandemic-era performance across the major property types. According to MBA, the dollar volume of loans for Industrial properties fell 69% year-over-year through Q4 2022.
In addition to the higher borrowing costs, uncertainty about the direction of consumer spending and retail markets also affects transaction demand.
Office properties had the second steepest fall through Q4, with lending falling by 56%. Multifamily lending fell by 52%, Hotel fell by 46%, and Retail declined by 44%.

6. MSCI-RCA PROPERTY PRICE INDEX

Commercial real estate prices fell 4.8% year-over-year and 2.7% month-over-month through January, according to the latest national all-property index released by MSCI-RCA. It was the steepest annual fall in the all-property index since 2010.
Higher borrowing costs remain the main culprit as deal activity slows, pushing pricing lower. Price growth slowed across all major property subtypes during January.
Industrial registered the only monthly price increase in January, following December’s trend.
Apartments posted the largest decline across property subtypes, falling 2.8% month-over-month and down 4.6% year-over-year.
Retail prices fell 0.9% month-over-month in January and 0.1% year-over-year.
Office prices are down 0.8% month-over-month and 0.7% year-over-year through January. Suburban offices were down 1.1% month-over-month and 0.5% year-over-year, while CBD Office held steady from December but fell 0.9% year-over-year.
Prices in the six major gateway markets tracked by MSCI-RCA posted their sharpest annual decline since June 2010, falling by 6.9% year-over-year, and registered their eighth consecutive monthly decline. Meanwhile, non-major metros fell 2.0% year-over-year, with prices falling 1.8% from the month before.

7. CPI INFLATION

The Consumer Price Index (CPI) rose 6.4% year-over-year and 0.5% month-over-month through January, according to the latest numbers from the Bureau of Labor Statistics. The annual inflation rate has fallen for seven consecutive months, though month-over-month inflation was slightly higher than in December.
Core CPI, which removes food and energy prices from the calculation and is more closely tied to monetary policy decisions, rose 5.6% over the past 12 months and 0.4% between December and January.
Used cars and trucks led all price declines on both a monthly and yearly basis, dropping -1.9% month-over-month and 11.6% year-over-year.
Fuel oil and medical care services also saw noteworthy declines to start the year, falling 1.2% and 0.7% month-over-month, respectively. However, fuel oil remains a significant contributor to annual price pressures, rising 27.7% year-over-year, while gas as a utility is close behind at 26.7%.

8. PHILADELPHIA FED MANUFACTURING INDEX

According to data from the latest Philadelphia Fed Manufacturing Index, manufacturing activity continues to fall. The barometer fell by 24.3% in February, almost triple its January decline of 8.9%. Markets had expected a 7.4% decline.
February was the lowest index reading for the Philly Fed index since May 2020 and was the sixth consecutive monthly decline in manufacturing activity.
There are three components of the index, one that measures overall activity, one that measures new orders, and one that measures shipments. The shipments subindex was the only one that registered a positive result in February, though at tepid levels.
Forward-looking indicators were more positive, such as expectations for growth and prices over the six months — but remained modest from a historical perspective.

9. NEW RESIDENTIAL CONSTRUCTION

Housing permits for privately-owned housing units experienced a slight rise in January from a month earlier, climbing 0.1% to a seasonally adjusted annual rate of 1.33 million, according to the latest data from the US Census Bureau and HUD. Permits remain 27.3% below their January 2022 level.
Housing starts in January fell by 4.5% month-over-month to a seasonally adjusted annual rate of 1.30 million. Starts are down by 21.4% over the last 12 months.
Housing completions rose 1.0% month-over-month in January to a seasonally adjusted annual rate of 1.40 million and are up 12.8% year-over-year.
While slowing homebuying demand and falling prices have increased housing affordability lately, tepid
permits and starts have held supply low, failing to alleviate the effect of the housing shortage.

10. US RETAIL SALES

According to advance estimates from the US Census Bureau, US retail and food service sales climbed 3.0% month-over-month in January to a seasonally adjusted $697.0 billion. Sales are up by 6.4% year-over-year.
January represented the largest monthly increase in sales since May 2021 and came after a 1.1% decline in December. The annual increase in sales is above levels seen in the previous two months but remains well below the gains seen over the past two years as activity rebounded from early-pandemic lows.
Separating Retail trade sales from the total, sales were up 2.3% month-over-month and 3.9% year-over-year through January.
Food services and drinking places are up by 25.0% over the past 12 months, while general merchandising stores have seen sales climb by 4.5% over the past 12 months.

SUMMARY OF SOURCES

(1) https://www.nahb.org/blog
(2) https://www.federalreserve.gov/monetarypolicy/fomcminutes20230201.htm
(3) https://go.placer.ai/library/navigating-a-new-normal-in-business-travelcommutes?submissionGuid=11055299-e0be-4a53-8e59-6bcdd8534d47
(4) https://www.chandan.com/independent-landlord-rental-performance-report
(5) https://www.costar.com/article/1225048335/commercial-real-estate-lending-drop-steepens-ledlower-by-industrial-financing
(6) https://www.msci.com/research-and-insights/market-insights
(7) https://www.bls.gov/news.release/cpi.nr0.htm
(8) https://www.philadelphiafed.org/surveys-and-data/regional-economic-analysis/manufacturingbusiness-outlook-survey
(9) https://www.census.gov/construction/nrc/pdf/newresconst.pdf
(10) https://www.census.gov/retail/marts/www/marts_current.pdf

People should take a step back from short-term changes and consider the big picture, according to one agent.

Due to the recent uptick in unpredictable mortgage rates, timing has become crucial in the housing market.

Rates that were approaching 6% are now approaching 7%, which has many buyers returning to the sidelines. On Friday, Mortgage News Daily reported the rate to be 6.78%. Recent inflation news is what caused the rate to increase.
In prepared remarks, Los Angeles Redfin realtor Justin Vold noted that while well-priced properties continue to receive many offers, he did observe that this week, as interest rates began to creep back up, buyers made fewer offers.
Since the beginning of the epidemic, buyers have been extremely sensitive to rates, according to Vold. I’m recommending folks pull back from daily rate changes and think about their long-term demands in today’s topsy-turvy market.
It is a perfectly good time to buy because there isn’t much competition if someone plans to live in a home for a long time and can pay today’s loan rates.

According to Vold, it might not be the best time for someone looking for a short-term residence and/or who can bear to pay their mortgage with a 6% or 7% interest rate.
Although interest rates will eventually decline, we don’t know when they will, so buyers must be prepared to maintain the original payment for the whole 30 years of their loan, he said. Reducing the monthly payment will be a plus when the opportunity to refinance does arise.
The housing market recovery will remain precarious until we see inflation and the general economy improve for a longer period of time, Redfin Economics Research Lead Chen Zhao said in prepared remarks.

According to Redfin, almost 85% of homeowners have interest rates far below 6%, and many are content to hold onto them.
The median list price of recently listed homes was $378,118, an increase of 1.2% over the previous year and the lowest since May 2020.

The ride will become unpleasant if you are unable to remain seated on the horse.

Following a 0.1% increase in December, the CPI data for January showed an unexpectedly high 0.5% gain. As a result, the 12-month inflation rate was 6.4%, exceeding estimates but still down from the 6.5% inflation rate in December.

Top US economist and managing director of global macro at TS Lombard, Steven Blitz, stated, “January CPI data make clear that inflation is not dropping to 2% without a recession raising unemployment above 4.5% and this underscores my long-held view that the Fed erred by downshifting hikes.”

According to Jeffrey Roach, chief economist for LPL Financial, “inflation is easing, but the path to lower inflation will not likely be smooth.” He says the Fed won’t make any hasty decisions based on a single report, but it is becoming increasingly likely that inflation won’t slow down quickly enough for the Fed. The University of Michigan’s benchmark survey shows long-haul inflation expectations remain set at 2.9%. This supports the idea that the Fed will raise interest rates by 0.25% at its next meeting rather than switching to larger increases.

These are two radically different views. A problem is that the inflation calculation method has undergone some revisions thanks to the Bureau of Labor Statistics. High housing costs have been a significant factor in the calculation of inflation. The Owner’s Equivalent Rent (OER), which represents what homeowners would typically pay if they weren’t constrained by longer fixed home loans, increased starting in January 2023.
The Bureau stated in 2020 that rent inflation for different types of housing units occasionally diverges, even in the same neighborhoods. That being said, they estimate that between 2013 and 2016, apartment rentals in the United States exceeded rents for detached homes by 0.75 percentage points per year after correcting for location effects.However, as energy costs began to decline, shelter—the category that includes OER as well as apartment rents—became the main driver of increased inflation. That translates into more inflation in January 2023 than it would have under the former model.

In an email, senior economist Dawit Kebede of the Credit Union National Association (CUNA) stated that the rise in property prices was responsible for half of the monthly increase. . “Its contribution to core consumer price index (CPI), excluding food and energy items, is even higher at 60%. The index for housing is a lagged indicator in measuring the CPI relative to current market trends. If this index stayed sideways in January, inflation would have slowed in line with expectations. The CPI is expected to reflect current market declines in housing prices in the second half of the year.”

The human knowledge of a second problem is more pervasive. People search for change even if, statistically speaking, doing so is a surefire path to some form of insanity. The statistical process control and management community cautions against making decisions of this nature. Reacting to every change makes behaviors erratic and is analogous to a rider who doesn’t saddle up firmly. Your experience as a result of the bounces will stay in your memory for a while.Inflation in the U.S. has been reducing for months, and we expect that it will continue to decline to more usual levels through the first half of 2023, said Carlos Vaz, founder, and CEO of CONTI Capital, a multifamily investment company. At the following FOMC meeting in March, the Fed is expected to raise interest rates by an additional 25 basis points because inflation is still running reasonably high and the labor market isn’t showing many signs of a big downturn.

Our Orange County commercial real estate brokers will help you every step of the way in finding the right commercial real estate investment property, contact us for details.

Rents will be pushed down by a weaker labor market and an increase in the availability of multifamily housing.

According to a forecast by Moody’s Analytics, multifamily rent growth will drop in 2023 to less than half of the 7.8% year-over-year increase that was recorded in 2022.

In addition to a deteriorating labor market, the business predicted that a mid-year rebound in single-family activity would help rebalance the housing market and bring multifamily performance closer to long-term averages.

This may be partially caused by what appears to be a trend of slowing inflation. According to Moody’s analysis of the Producer Price Index data for December 2022, which was published on January 18 and showed that the headline PPI was down 50 basis points from November (seasonally adjusted), inflationary pressures are beginning to diminish. To put things in perspective, the headline PPI was significantly below the peak of 11.7% in March 2022 and at its lowest annual rate since March 2021, when the index was at 4.1%.

Falling inflation has traditionally had a strong correlation with deteriorating labor market conditions and higher unemployment rates, particularly when it precedes a recession. People without jobs frequently live with relatives or share housing with others in order to reduce their living costs. Additionally, fewer people would be able to afford to pay more to secure an apartment as a result of lower average salaries.

Data indicating the single-family housing market may be bottoming out, with building permits down 29.9% year over year and 1.6% from the previous month in December, would also have an impact. From the same point in 2021, housing starts were down 21.8%. But progress is still being made, at least for the time being. Although the Fannie Mae analysis suggesting financial rewards were what truly prompted consumers to buy houses earlier in the pandemic would raise some doubts, the greater short-term supply could attract more buyers. The cost of a mortgage is still greater than it has been in a while. The National Association of Realtors also reported that existing house sales in 2022 were at their lowest level in a decade, down 17.8% from 2021, as Moody’s pointed out.

Then there is the massive amount of multifamily housing that is being constructed; according to Moody’s, about 300,000 units are scheduled to come online this year across tracked U.S. markets. This represents a huge increase from 2022 and would set a database record for the number of completed apartments. The acceleration of stalled multifamily projects due to the slowing of inflation—largely as a result of lower energy and material costs—confirms our upbeat projections for this level of activity in 2023.

1. GDP

Real GDP increased at a 2.9% annual rate in Q4 2022, according to the advance estimate by the Bureau of Economic Analysis. Economic output has slowed from Q3 2022, when real GDP grew at a 3.2% annual rate.
While recession fears have amplified heading into 2023, economic output has remained robust from a historical standpoint given the Fed’s aggressive monetary tightening measures. The US has now recovered all output lost during the pandemic, with the end of year output in 2022 registering a 2.1% annual growth rate.
Driving the increase in output during Q4 were increasing in private inventory investment, consumption, government spending, and nonresidential fixed investment. These increases were partly offset by declines in residential fixed investment and exports.
Manufacturing, specifically petroleum/coal products, chemicals, as well as mining, utilities, and construction, led increases in private inventory investment.
An increase in both goods and services spending contributed to the growth of consumer spending.
Growth in intellectual property products propelled nonresidential fixed investment during Q4, while falling single-family construction and industry commissions caused a drag on residential fixed investment.

2. MORTGAGE APPLICATIONS

Mortgage applications climbed by 7% during the week ending on January 20th, 2023, following a massive 27.9% surge the week before, according to the Mortgage Bankers Association.
Mortgage application demand fell significantly during the second half of 2022 as mortgage rates rose steeply. After falling for much of December, mortgage applications increased to begin 2023 and have increased sharply throughout January.
Refinance applications roes 14.6% during the week ending January 20th, while purchase applications rose 3.4%.
While homebuying demand remains relatively weak compared to early-cycle levels, cooling prices and borrowing costs could draw in many households who remained sidelined in recent months due to affordability constraints.

3. INTEREST RATE EXPECTATIONS

Federal Funds futures pricing data shows an overwhelming 98% likelihood of a 25 basis points hike at the FOMC’s January 31st-Febuary 1st meeting, according to forecasts complied by the Chicago Mercantile Exchange.
Inflation has slowed in recent months, leading to a growing consensus that the Federal Reserve will soon reduce the pace of rate-hikes, though not stop them entirely. Consumer price growth remains well above the central bank’s 2% target and officials have signaled the need to continue restrictive policy until price pressures calm.
In a recent statement, Fed Vice Chair Lael Brainard acknowledged that labor supply remains constrained, but that demand has cooled in recent months and a 1970’s style wage-price spiral hadn’t materialized as some feared. Conversely, Brainard spoke of a “price-price” spiral taking place as retail markup growth exceeds input price growth. Cooling demand and loosening supply chain constraints, she hopes, will continue to lead to disinflationary pressures on goods.

4. NEW HOME SALES

New sales of single-family homes climbed for the third consecutive month, according to the latest data from the US Census Bureau.
Home sales rose 2.3% in December to a seasonally adjusted annualized rate of 616k units, up from the revised 602k units registered in November. Falling mortgage rates has increased homebuying demand in recent weeks, evident in a recent increase in mortgage applications.
Home sales continue to be lower on a year-over-year basis, dropping 26.6% over the past. twelve months.
Sales rose in the more “affordable” regions of the Midwest and South while falling in the Northeast and West.

5. INDEPENDENT LANDLORD RENTAL PERFORMANCE

The on-time collection rate for independently operated residential properties improved by 6 basis points between December and January, landing at 81.5%, according to the latest Independent Landlord Rental Performance Report by Chandan Economics. It was the fourth consecutive month that average on-time rent collections have held above 81%, the first in the history of the dataset.
Gateway markets (New York, Los Angeles, San Francisco, Washington, DC, Houston, Dallas, Chicago, and Boston) have maintained higher on-time payment rates than units located elsewhere for thirteen consecutive months through January 2023. The current on-time collection rate for gateway metros stands at 84.2% through January 15th compared to 81.0% in non-gateway metros.
The on-time payment rate remained higher for units in the Sun Belt compared to units located elsewhere for the second consecutive month, reaching 82.4%
Analyzing performance trends at different rental price points, units with monthly rents below $1,000 continue to register the lowest average on-time payment rate through January 2022, coming in at 79.8%. Upper middle-priced rental units (charging between $2,000 and $2499 per month) perform the strongest, with a January on-time payment rate of 85.6%. High-priced rentals, defined as those charging more than $2,500 are a close second, with an on-time payment rate of 8.5% in January.
2–4-unit rental properties held the highest on-time payment rates of all sub-property types in January, coming in at 82.4%.

6. MSCI-RCA PROPERTY PRICE INDEX

Commercial real estate prices rose 0.9% year-over-year through December, with prices falling 1.2% monthover month according to the latest national all-property index released by MSCI RCA.
Price growth slowed across all property subtypes during the fourth quarter of 2022 but remained mostly positive, as higher borrowing costs dampened transaction activity.
Industrial registered the only monthly price increase in December; However, both the warehouse and flex sales have fallen on a year-over-year basis. —18% and 2.0%, respectively.
Apartments prices fell 1.9% month-over-month in December but climbed 1.8% year-over-year.
Retail prices growth slowed to 3.1% year-over-year and fell 0.5% monthly in December. Still, retail centers saw double-digit annual sales growth to end the year. Shop sales fell sharply in December, with the dollar volume of new deals declining by 29% from the month prior.
Office prices rose 2.9% year-over-year in December while falling 0.4% month-over-month. Year-over-year, the Hotel sector saw both positive pricing trends and sales growth, rising by 7.2% and 5.0% respectively.
Prices in the six major gateway markets tracked by MSCI-RCA continued to slow in December, falling by 2.1% year-over-year and registered its seven consecutive monthly decline. Meanwhile, non-major metros slowed to 2.6% year-over-year, with prices falling 1.0% from the month before.

7. CMBS SPECIAL SERVICING RATE

The CMBS special servicing rate tracked by Trepp fell 3 basis points in December, its first monthly decline in the past six months.
Special serving, which typically increases during economic downturns, fell significantly in recent years as pandemic constraints eased. However, rates began to rise during the second half of 2022 as borrowing costs rose amid weakening demand.
Lodging saw the largest decline in special servicing, falling 32 basis points from November. Lodging, Apartment, and Retail special service rates all declined in December while Office special serving was unchanged and Industrial rose slightly.
Office accounted for 85% of new special servicing transfers, but loans coming out of special serving largely offset this.

8. MILLENNIAL HOMEBUYING DEMAND

A new survey by Real Estate Witch reports that 92% of millennials have indicated that inflation has either delayed or significantly impacted their buying plans.
While the relationship comes as little surprise, Baby Boomers, who have greater wealth on average, are more than twice as likely than millennials to say that their decisions have not been impacted by inflation.
Specifying those challenges, 59% of millennial respondents claim to be saving more for a home, 36% plan to spend more on a home, 28% are delaying plans for now, 26% are buying a fixer upper, while 25% have opted into buying a smaller home.

9. WFH COMMUTES

A review by the National Bureau of Economic Research estimates that would-be-commuters save 72 minutes per day on average when working from home.
Despite growing concerns about productivity shortfalls brought forward by work-from-home adoption, data shows that much of saved commute time has been funneled into work.
Roughly 40% of remote workers claim to use previous travel time to work a job or side hustle. 34% use this time to relax or exercise, while about 11% use the time to take care of loved ones.
The paper also noted the various “costs” saved from work from home adoption, including direct ones such as money for gas or public transit, as well indirect ones like personal grooming for work.

10. CONSUMER SENTIMENT

Preliminary January data for the University of Michigan’s Survey of Consumers showed consumer sentiment rising for the second consecutive month, climbing 8% above December’s level while remaining about 4% lower than this time last year.
From a historical perspective, sentiment remains extremely low as consumers battle high inflation, but as inflationary pressures have eased in recent months, sentiment has improved.
Individual assessments of their own personal finances climbed 16% in January to its highest reading in eight months. While consumers’ short-run economic outlook fell slightly in January, the long-run outlook rose by 7%, reaching its highest level in three months.
Year ahead inflation expectations are also on the downtrend, falling for the fourth straight month and reaching its lowest point since April 2021. However, according to the analysis, expectations remain above the 2.3-3.0% inflation forecasts that was experienced in the years leading up to the pandemic.

SUMMARY OF SOURCES

(1) https://www.bea.gov/news/2023/gross-domestic-product-fourth-quarter-and-year-2022-advanceestimate
(2) https://www.mba.org/news-and-research/newsroom/news/2023/01/25/mortgage-applicationsincrease-in-latest-mba-weekly-survey
(3) https://www.newyorkfed.org/microeconomics/sce#/
(4) https://www.census.gov/economic-indicators/#home_sales
(5) https://www.chandan.com/independent-landlord-rental-performance-report
(6) https://www.msci.com/research-and-insights/market-insights
(7) https://www.connectcre.com/stories/office-dominates-new-transfers-as-cmbs-special-servicingdeclines-in-december/?utm_medium=email&_hsmi=242560693&utm_content=242560693&utm_source=hs_email
(8) https://www.realestatewitch.com/2023-millennial-home-buyer-report/#inflation
(9) https://www.nber.org/system/files/working_papers/w30866/w30866.pdf
(10) http://www.sca.isr.umich.edu/

All-time high-interest rates and a decline in 1031 exchanges are doing away with “would-be” sale transactions.

According to a recent analysis from a leading commercial real estate firm, cap rates in the single-tenant net lease sector rose for a third straight quarter at the end of 2022. In the third quarter, single tenant cap rates for retail climbed by 5.95% (a 9 basis points increase), office rose to 6.95% (a 15 basis points increase), and industrial by 4 basis points to 6.65%.

The cap rates for net-leased properties are under increasing pressure, according to Randy Blankstein, president of The Boulder Group. Over the course of 2022, borrowing costs for institutional and individual investors will both increase. For context, the 10-year Treasury yield started the year at 1.53% and concluded at 3.87%.

Analysts say that in spite of deal flow slowing and properties remaining on the market for longer periods of time, the market supply of net lease assets increased in the fourth quarter. In the first quarter of 2022, cap rates for retail, office, and industrial properties were all close to historic lows. However, when borrowing costs rose throughout the year, retail and office cap rates soared. Office cap rates increased by 25 basis points from Q1 to Q4, while single-tenant retail cap rates increased by 20 basis points. According to industry analyst findings, the spread between industrial cap rates only increased by 5 basis points.In the fourth quarter, the supply of net-leased properties grew by over 10%. Cap rates on recently built facilities leased to Dollar General increased by 40 basis points over the previous quarter. Additionally, 7-Eleven (+25 bps), DaVita Dialysis (+25 bps), and Starbucks (+15 bps) also saw cap rate growth.

According to analysts, based on 2022 Q4 results, transaction volume for the net lease sector will continue to lag behind the robust transaction levels of 2021 as increased borrowing costs and a diminishing number of 1031 exchange investors limits transactions. Net lease investors will closely follow the Federal Reserve’s future meetings since its monetary policies will continue to affect the market.

Our Orange County commercial real estate brokers will help you every step of the way in finding the right multifamily investment property, contact us for details.

Orange County is one of the most sought-after places to invest in commercial real estate. With its vibrant economy, abundant entertainment, and diverse landscape, Orange County is the ideal place to invest in commercial real estate. Whether you are an individual investor looking to purchase a commercial property or a business owner looking to expand your operations, Orange County offers a wide range of commercial properties for sale.

Orange County is home to many different types of commercial properties for sale. From office buildings and retail spaces to industrial and warehouse properties, Orange County has something for everyone. The region has also been experiencing a surge in investment activity in recent years, making it an attractive destination for investors.

What to Look for When Choosing a Commercial Property in Orange County

When it comes to investing in a commercial property in Orange County, there are a few key factors to consider. First, it’s important to assess the local market and determine the types of properties available. This will help you decide the best areas to invest in and the type of property that best suits your needs and budget.

Second, it’s important to consider the potential for appreciation and rental income. Many investors look for properties with potential for appreciation as well as rental income potential. This will help you maximize your return on investment.

Third, it’s important to assess the local economy and consider the potential for growth. The local economy can have a major impact on the value of the property and its potential for appreciation. Finally, it’s important to consider the location of the property and its proximity to amenities, such as schools, shopping malls, and public transportation.

Benefits of Investing in Commercial Real Estate in Orange County

When it comes to investing in commercial real estate in Orange County, there are many benefits to consider. First, the local economy is strong and growing, making it an attractive destination for investors. This can translate into appreciation potential and rental income potential.

Second, the area is home to a variety of businesses, making it an ideal place to invest in commercial properties. There are a variety of different types of properties available, from office buildings and retail spaces to industrial and warehouse properties.

Third, the area has a vibrant entertainment and cultural scene, making it an attractive destination for businesses and investors alike. This can help to drive up property values and attract tenants. Finally, the area has excellent transportation links, making it easy to reach from other parts of the country.

Steps to Finding a Commercial Property in Orange County

When it comes to finding a commercial property in Orange County, there are a few key steps to consider. First, it’s important to research the local market and determine the types of properties available. This will help you decide the best areas to invest in and the type of property that best suits your needs and budget.

Second, it’s important to analyze the local economy and consider the potential for growth. The local economy can have a major impact on the value of the property and its potential for appreciation.

Third, it’s important to assess the location of the property and its proximity to amenities, such as schools, shopping malls, and public transportation. These factors can all have an impact on the value of the property and its potential for appreciation.

Fourth, it’s important to consider the potential for appreciation and rental income. Many investors look for properties with potential for appreciation as well as rental income potential. This will help you maximize your return on investment.

Finally, it’s important to evaluate the financials of the property, including the cost of acquisition and the cost of holding. This will help you determine the best investment strategy for your needs.

What to Consider Before Investing in a Commercial Property in Orange County

Before investing in a commercial property in Orange County, it’s important to consider a few key factors. First, it’s important to evaluate the financials of the property, including the cost of acquisition and the cost of holding. This will help you determine the best investment strategy for your needs.

Second, it’s important to assess the location of the property and its proximity to amenities, such as schools, shopping malls, and public transportation. These factors can all have an impact on the value of the property and its potential for appreciation.

Third, it’s important to consider the potential for appreciation and rental income. Many investors look for properties with potential for appreciation as well as rental income potential. This will help you maximize your return on investment.

Finally, it’s important to research the local market and determine the types of properties available. This will help you decide the best areas to invest in and the type of property that best suits your needs and budget.

Tips for Finding the Right Commercial Property for Sale in Orange County

When it comes to finding the right commercial property for sale in Orange County, there are a few key tips to consider. First, it’s important to research the local market and determine the types of properties available. This will help you decide the best areas to invest in and the type of property that best suits your needs and budget.

Second, it’s important to analyze the local economy and consider the potential for growth. The local economy can have a major impact on the value of the property and its potential for appreciation.

Finally, it’s important to evaluate your own financial situation and determine what type of investment strategy best suits your needs. This will help you make an informed decision when it comes to investing in a commercial property in Orange County.

Financing a Commercial Property in Orange County

When it comes to financing a commercial property in Orange County, there are a few key considerations. First, it’s important to research the local market and determine the types of properties available. This will help you decide the best areas to invest in and the type of property that best suits your needs and budget.

Second, it’s important to assess the local economy and consider the potential for growth. The local economy can have a major impact on the value of the property and its potential for appreciation.

Third, it’s important to evaluate your own financial situation and determine what type of investment strategy best suits your needs. This will help you make an informed decision when it comes to financing a commercial property in Orange County.

Finally, it’s important to consider the types of financing available. Many investors turn to traditional lenders, such as banks and credit unions, to finance their commercial properties. Other investors look to private lenders or alternative financing options. It’s important to evaluate all of your options and choose the financing option that best suits your needs.

Conclusion

Investing in commercial real estate in Orange County can be a great way to build wealth and generate passive income. However, it’s important to do your research and consider all of the factors before making an investment. It’s important to understand the local market, evaluate the potential for appreciation and rental income, assess the location of the property, and evaluate your own financial situation.

With the help of SVN Vanguard, you can find your ideal commercial investment property in Orange County. Our team of experienced real estate professionals can help you find the right property for sale and provide the guidance you need to make an informed decision. Contact us today to get started on your commercial real estate journey.