Demise Of The Flea Market: Notable Sites Targeted For Redevelopment

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Some of the oldest flea markets in South Florida are being snapped up by investors.

But the buyers aren’t interested in the income generated from the rent paid by vendors offering goods, services or entertainment to bargain hunters.Instead, they’re preparing to build more lucrative projects that will serve the people and companies flocking to the region.

It’s a trend emblematic of South Florida’s changing landscape as money and interests from all over the world claim old apartment buildings, offices, shopping centers, golf courses and even churches to construct new residential buildings, office towers and industrial parks.

But the trend is not unique to South Florida.

“Unfortunately, flea markets across the country, especially in the Sun Belt, are big pieces of land that fall victim to redevelopment,” said Rick Landis, president of the National Flea Market Association.

In the past year, current owners of three local flea markets filed applications to redevelop them into something else – namely as places to store stuff.

New York-based Link Logistics acquired the 43.8-acre Opa-Locka Hialeah Flea Market at 12691 N.W. LeJeune Road in northwest Miami-Dade County as part of an $80 million, 72-acre land deal back in July 2017. Link wants to replace the flea market, founded in 1985, with a 740,000-square-foot industrial park.

“Our proposed development project would represent more than $90 million in new investment and generate an estimated 1,000 construction jobs and 765 permanent high-quality jobs for the community,” a Link spokesperson told the Business Journal.

Fifty miles north of Opa-Locka, Delray Beach-based developer Anthony Pugliese plans to build a 16-pump gas station with a convenience store and car wash, plus 140,140 square feet of self-storage space at 5283 Atlantic Avenue in unincorporated Palm Beach County. He’ll also demolish the 30-year-old Big Apple Shopping Bazaar that occupies part of the 4.53-acre site.

Yoan Machado Torres, a project manager with West Palm Beach-based engineering firm WGI, said Pugliese will make far more revenue leasing the 4.5-acre property to a storage company and a convenience store than he does from 50 or so flea market vendors. (Pugliese has owned Big Apple since 2000.)

North Miami-based real estate investor IMC Equity Group is advancing blueprints to replace the 382,000-square-foot Festival Marketplace, at 2900 W. Sample Road in Pompano Beach, with 773,000 square feet of industrial space.

IMC, which paid $56 million for Festival Marketplace’s 23.8 acres of land, did not respond to phone calls from the Business Journal.

Already gone

At least two other South Florida flea markets have recently closed.

IMC knocked down Flea Market USA in Miami-Dade’s West Little River to make way for Northside Town Station, a proposed 11-story building with 370 apartments and about 46,000 square feet of retail at 2963 N.W. 79th St. IMC paid $13.5 million in May 2019 for the 15.45 acres of land.

Another recent victim of progress: US1 Discount Mall at 18901 S. Dixie Highway in Cutler Bay. Built in 1987, the 49,959-square-foot building is shuttered and awaits its replacement: a seven-story, 236-unit apartment building. Mdist Wholesale paid $6.67 million for the 4.25-acre property in June 2021.

Land rush

Jonathan Kingsley, executive managing director of office services for Colliers in Broward County, said flea markets are being sought for redevelopment because land is scarce and skyrocketing in value.

“Much like those years where we saw the conversion of older trailer parks to either [multifamily] residential or industrial, we are now seeing the same effect to flea markets,” he said.

Multifamily apartment buildings are lucrative properties, especially since rents have been climbing at record rates since the onset of the pandemic, but they can’t be built just anywhere.

“Residential is usually your highest and best use, but the area still has to make sense,” said Louis Archambault, an attorney with Saul Ewing Arnstein & Lehr who represents real estate investors. For example, a flea market that’s surrounded by intense industrial uses probably won’t work as a place for multifamily redevelopment, he said.

Industrial, on the other hand, is a hot commodity, thanks to the rise of e-commerce companies and the perceived need to hoard materials due to ongoing supply-chain issues. As such, flea markets, as well as obsolete offices and retail centers, are being replaced by industrial parks, said Brian Smith, an executive managing director and South Florida industrial lead for JLL.

“When you have a market like industrial that is hot right now in South Florida, people are reassessing their [property’s uses],” he said.

Uncertain future

Rick Landis, president of the National Flea Market Association, said it isn’t just land speculation and development that’s been hurting flea markets; it’s competition.

“I’ve been doing this for 51 years. What’s changed is that there weren’t any discount retailers. There was no Amazon or online competition. So, you can’t [always] get the best bargain at flea markets anymore,” said Landis, who owns two flea markets in California.

But flea markets fulfill another niche that Amazon can’t: the ability for customers to socialize and haggle, Landis said.

“Flea markets are the last bastions of free enterprise,” he said.”The guy with the best deal and the best product wins.”

Indeed, flea market fees are comparatively lower than the rising retail rents at typical shopping centers, several vendors told the Business Journal. Flea markets are also more flexible.

“You’re not locked into a multiyear lease,” Landis said. “This is all bare bones.”

And without low overhead and flexible terms, many mom-and-pop flea market businesses won’t survive, said Maria Icheva, assistant director of planning and operations at Florida International University’s Jorge M. Pérez Metropolitan Center.

Flea revival

Yet, some entrepreneurs have faith in the flea market model.

Dan Whitebook said he sees an opportunity to keep the spirit of the Opa-locka Hialeah Flea Market alive.

Last month, Whitebook, president of Atlantic Hosiery, turned part of his 200,000-square-foot warehouse and wholesale retail outlet at 13499 N.W. 49th Ave. into a flea market, about a half-mile from the original flea market. He said as many as 250 vendors from that venue have expressed interest in moving into what he’s named the Opa-Locka Hialeah Indoor Flea Market.

Whitebook charges vendors between $350 and $600 a week, similar to the fees they paid at the Opa-Locka Hialeah Flea Market. And the additional customer traffic will help his store’s business.

 

Source:  SFBJ

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Small Investor Opportunities Surface For Industrial

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Despite strong overall demand, rising interest rates are changing the fundamentals of industrial sales deals with retrading becoming ubiquitous.

Lately, 100% of the retrading activity has been for that reason, according to NAI Global brokers during the July Logistics Conference Call.

One broker said that institutional investors are putting everything on hold for 5 to 6 weeks to see how interest rates shake out, according to NAI Global.

However, the group noted that there is upside to some of the retrading activity. According to some of the broker comments, sales that are dropped during the due diligence period—and most often to institutional investors—is allowing local and usually smaller regional investors who have been “boxed out” the opportunity to buy in what has been one of the most competitive environments for industrial property sales in history.

BJ Turner, founder of Dunleer, a Los Angeles-based private real estate investment and development firm that focuses on industrial and multifamily sectors, tells GlobeSt.com that there are definitely more and more re-trades happening in the marketplace.

“Deals that were put together 45 to 60 days ago have wrapped up due diligence and now it is time to remove contingencies,” Turner said. “Their lenders are either pencils down or telling them the rate for debt financing is 100 bps to 150 bps higher, so something has to give—and in most cases, it’s the buyer saying to the seller they still like the deal, but due to the cost financing, they can’t afford to pay the same price they did before. In many cases, there is some form of a meet-in-the-middle solution that works for both the buyer and seller and deals get done. In the deals that don’t get done, there are opportunities for users to put deals into escrow they couldn’t compete on three to six months ago.”

Demand, No Less, Remains Robust

Doug Ressler of Yardi’s Commercial Edge said despite those growing weary of a possible recession around the corner, demand for industrial space remains as high as ever.

He said that in June, the average in place rents grew 4.9% year-over-year, the vacancy rate fell to 4.6% and the average cost of a new lease signed in the past 12 months was 88 cents higher per foot than the overall average.

“Supply of new industrial space cannot maintain pace with demand, a problem more pronounced in areas where geography limits the amount of land available for development,” Ressler tells GlobeSt.com.

 

Source: GlobeSt.

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Commercial Contracting Challenges Expected to Continue

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The challenges facing commercial contractors – including increased costs of materials and labor, shortages, and delays – will likely continue in the future, according to a recent Cushman & Wakefield survey.

A whopping 98% of general contractors surveyed by the firm indicated an increase in supplier costs and material lead times, while 75% reported increased project execution timelines. And 96% of GCs said they expect future supplier costs to remain high, while 73% anticipate project execution timelines to increase slightly to significantly. Eighty-eight percent expect lead times to increase slightly to significantly in the next six months.

“Sound planning with clearly defined strategic goals allows for a more certain measure of true risk profile and a better prediction on a project’s cost and estimated time of delivery,” writes Cushman’s Jason D’Orlando. “Project managers must be brought aboard early to revise  timelines,  reduce risk and deploy new tactics, all strategic efforts that will increase the likelihood of meeting a project’s budgets, milestones and timelines.  Preprogramming is the key to running a successful and on-time project in 2022 compared to 2019. Early material procurement and expediting the early works package while you are still in the location analysis and concept planning phases saves time and prevents cost overruns.”

 

Source:  GlobeSt.

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A Strong U.S. Dollar Could Mean A Lot — And Not So Much — For Commercial Property Investment

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A strong U.S. dollar could propel foreign interest in commercial real estate stateside as investors flee weakening economies and geopolitical conflicts abroad.

But the strength of U.S. currency is just one piece of a complex puzzle that dictates global investment activity, and it won’t necessarily translate into billions of dollars pouring in from overseas.

As of July 29, the value of the dollar was outpacing the euro and the pound by 2 cents and 18 cents, respectively. That could signal an even greater investment opportunity in the U.S. among foreign buyers, though it is far from the only factor at play, FTI Consulting Senior Managing Director Josh Herrenkohl said.

“The value of the investment will always trump the value of currency,” he said. “While the value of the U.S. dollar certainly plays into some of the decision-making, at the end of the day, institutional investors are looking to acquire assets that are going to appreciate and will continue to be strong on a go-forward basis, regardless of what currency they’re paying.”

Long seen as a safe haven for assets, overseas investment in U.S. commercial properties made a triumphant return in 2021 when foreign institutions purchased close to $71B of domestic CRE. That was double 2020’s volume and marked the greatest foreign investment in the U.S. since a total of $94.6B was invested in 2018, according to Real Capital Analytics.

If history repeats itself, foreign interest could break down along national lines, Herrenkohl said.

In 2015, when the strength of the dollar outweighed most world currencies, countries with economies similar to the U.S., like Canada, chose to keep their money close to home. But countries with more volatile economies, like Brazil and Argentina, chose to level up their U.S. investments.

“You think we have it bad, many countries have seen 20%, 25%, 30% inflation,” he said. “Even if you are paying a little bit more because of the U.S. denomination, you’re less subject to many of those fluctuations that South American investors might traditionally be faced with.”

In other parts of the world, geopolitical conflicts could dissuade certain countries from investing in the States, Herrenkohl said. China, for example, put a significant amount of money into U.S. commercial real estate in 2015, but that is less likely this time around.

“I don’t think we are going to see a lot of investment in the near term from China, and the same could be said for Russia, for obvious reasons,” he said.

Asian investors have so far this year been more cautious with their investments in the U.S. and Europe, said Harry Tan, head of Asia Pacific research at Nuveen Real Estate. This hesitancy is motivated more by elevated recessionary risks and higher borrowing costs than changes to currency value, he said.

“Investors backed by dollar funding may take the opportunity to accelerate their investments into markets where they already have an existing interest to invest into,” Tan said in an email. “However, institutional investors invest into CRE based on fundamentals; they do not speculate on currency movements.”

The relative strength or weakness of the dollar against the euro makes little difference in investment decisions made by Commerz Real AG, a German investment firm, because the company is legally required to hedge foreign currencies, which protects its assets from future fluctuations, Head of Fund Management Timo Lutz said.

“It doesn’t really matter if the exchange rate is 1-to-1 — as it is more or less nowadays — or 1-to-20 or 1-to-40,” he said. “You have to bear the costs … but you are more or less protected in the long run.”

Commerz Real considers many factors when choosing where to invest, and the cost of currency is just one part of that equation. Investments in U.S. real estate come at a premium when there is a strong dollar, but that added cost is outweighed by other factors, such as the market’s unprecedented demand and distance from the Russia-Ukraine War, Lutz said.

“It’s always the big picture for us from a research point of view,” he said. “We are of the opinion that the U.S. economy is slightly stronger, and they will most likely be able to manage a recession more quickly than the eurozone.”

Commerz Real could choose to redirect funds away from the U.S. if the cost of hedging decimates returns, though Lutz said that is unlikely. The company has $3.19B of assets under management in the U.S., including hotels, offices and retail properties.

“The expectation is that the European Central Bank will increase interest rates, meaning hedging costs will get cheaper and cheaper,” he said. “Nowadays, it’s quite high due to the fact that there is a huge gap, but that will narrow the gap.”

American investors in European CRE flocked to the continent in the first quarter of this year, but cross-border investment volume slowed in Q2, in part due to economic impacts from the Russia-Ukraine War, said Judith Fischer, an associate at Knight Frank, a UK-based real estate consulting firm.

The weak outlook for the European economy, fueled by rising interest rates and inflation, a softening of commercial property prices and a waning occupier market, are all factors behind the dip, Fischer said.

“They are probably worried of what is still to come in Europe,” she said. “That’s why you’re not seeing so much of an influx of institutional investors. At the moment, they may be more hesitant.”

The decision of whether or not to invest in the U.S. could also come down to how much confidence a buyer has in the Federal Reserve. The Fed has thus far responded to volatility in the market by raising interest rates, which could deter some investors, said William Edward Spriggs, a Howard University professor of economics and chief economist for the AFL-CIO.

“The U.S. economy continues to be strong, but it faces clear headwinds,” he said. “The Fed is one of those threats because the Fed is mischaracterizing what it needs to slow down. We’ve already seen the slowdown in the U.S. from fixed investment, which would include commercial real estate.”

Despite economic turmoil in the U.S. and the Fed’s aggressive — or, in Spriggs’ view, misguided — attempts to tamp down inflation, overseas investors will continue to view the U.S. dollar as a safe and stable currency.

To explain this phenomenon, Spriggs referenced a moment in history when Alexander Hamilton solidified America’s reputation as a reliable economy by promising to pay off its debts from the Revolutionary War.

“The commitment that Hamilton made has forever marked the United States as the most stable government in the world,” he said. “The United States always pays its debts — and that’s why they revere the dollar.”

 

Source:  Bisnow

 

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Commercial Real Estate Investor Sentiment Signals A Changing Outlook

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As we round the halfway mark of 2022, dynamics are shifting in the commercial real estate investment environment.

Preliminary data from SitusAMC Insight’s second quarter 2022 institutional investor survey shows changing preferences among property segments.

Compared to the previous quarter, the percentage of investors selecting industrial as the best property type over the next year plummeted from 47 percent to 11 percent, citing major concerns that the sector is overpriced. Apartment was the most favored segment among investors; 56 percent of investors ranked apartment as the best sector, up from 21 percent last quarter.

Skyrocketing mortgage rates are putting a crimp in single-family affordability, resulting in strong demand conditions for apartments. Several investors also remarked that apartments were the best inflation hedge among the property types. Retail appears to be making a comeback, with investor preference for the sector climbing to 33 percent from just 11 percent last quarter, citing opportunity for yield plays. Investor sentiment on office, on the other hand, is extremely bearish; no investors selected it as the top property type, with the sector falling from 16 percent in first quarter.

SitusAMC is seeing these sentiment shifts play out in their client work. After so many quarters of seemingly unstoppable growth, the industrial sector is starting to show initial signs of a slowdown, even though fundamentals are still strong. While rents are still growing in most markets and investors are still anticipating widespread above-inflationary rent growth and are underwriting to these assumptions, it is unrealistic to expect another quarter of 8 percent to 12 percent rent growth. Meanwhile, the buyer pool for industrial has been shrinking since the beginning of the year, and some of the larger portfolios are not being financed or traded.

Some Value Deterioration

The value driver for apartments in the second quarter was market rents and rent growth. There is still very strong sales activity, but, as with industrial, there are fewer investors at the table when the bidding reaches the best and final round. Regardless, the fundamentals remain very strong. For the first time in several quarters, low-rise apartments are performing better than garden apartments. Suburban is still outperforming urban, but some urban locations are showing signs of growth.

Investment rates are not decreasing across the board— they are very specific to the assets and the submarket. Gateway markets are lagging but improving. New York is the leader of the gateway markets, and Chicago is seeing improvements in rent growth, which is translating into some value improvement. San Francisco is starting to produce positive indicators as well, and Boston and Seattle are experiencing growth momentum. SitusAMC Insight’s proprietary multifamily affordability indexes indicate improved affordability in gateway markets vs. affordability deterioration in non-gateway metros.

SitusAMC’s retail valuations were slightly up in second quarter. Leasing activity has picked up, with many reflecting short-term mid-pandemic leases that are expiring and being renewed. A couple of large deals involving grocery-anchored centers have signaled very strong cap rates, in the low-to-mid 4 percent range, in strong markets like San Diego and Miami. However, these rates were negotiated at the beginning of the year when the debt markets had not yet changed.

Some SitusAMC clients are repricing their assets down slightly because of the debt market environment. In addition, recent strong retail sales are unlikely to continue as inflation erodes consumers’ disposable income and redirects spending to everyday necessities like gasoline and food. Retail outlets that provide essential goods, such as neighborhood and community centers with grocery anchors, will likely maintain steady income streams. Malls could be hurt by the decline in nonessential spending.

Office values remained relatively flat in the second quarter; most of the increases in values seen were owing to contractual rent increases. Overall office values are skewed, however, by strong growth in life science. SitusAMC is seeing many tenants downsizing. Daily office occupancy is mired around 40 percent, and it might not exceed 60 percent in the long term. There has been a flight to quality as employers try to attract top talent during a tight labor market.

On the bright side, near-term market rent growth has steadily increased over the past year, however, and is getting closer to the standard 3 percent. The strongest growth markets continue to be in the Sun Belt and the suburbs, which are doing better than CBD and gateway markets, but rents are increasing in those areas, as well. There have also been a lot of early renewals—near 10 percent, the highest level since 2015—though this is partly due to leases that expired during the pandemic and were renewed on a short-term basis.

 

Source: Commercial Property Executive

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What CRE Investors Should Consider When Contemplating A Recession

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Investors “shouldn’t be afraid of an impending recession” and should instead consider what the economic picture will look like over hold times of three, five and ten years, according to one industry watcher.

“It’s hard to say if or when the next recession will be because there’s a wide range of economic crosscurrents in play. That makes it very difficult to predict,” says Marcus & Millichap’s John Chang, adding that while “the risks are rising, a recession is not a foregone conclusion.”

On one hand, Chang says, job creation is robust, with an average of 488,000 jobs added per month this year. Unemployment remains low at 3.6% and wage growth strong at 5.2%. And while retail sales have flattened recently they are still up nearly 8% over last year.

“Those are all positive economic readings pointing to a steady growth outlook,” Chang notes. “On the other hand, we have exceptionally high 8.5% inflation, rising interest rates, a falling stock market and falling confidence levels. In many ways there’s a fear factor coming into play that could cause people to slow their spending, and that could induce a recession.”

So does it really matter if the US undergoes a recession? That depends, according to Chang.

The Great Financial Crisis involved a liquidity crunch that curtailed real estate investment, which Chang says is unlikely in the current scenario. And while there are a variety of causes and effects for recession periods, Chang predicts the US is likely looking at a recession along the lines of the 1981 or 1990 downturns. Both periods were preceded by strong growth and rising inflation that pushed the Fed toward the same types of aggressive rate hikes we’re seeing today. Yields softened in both recessions, but nothing like the 2009 decline, and Chang noted considerable variation among property types, with apartments, for example holding up well in the 1980s and dipping mildly negative in 1991 – though “nothing like the hit the sector took in 2009,” he says.

Much of the risk to CRE investors will depend on asset and location.

But “in general, real estate has delivered positive returns through most recessions,” Chang says. “And even when returns dipped, it was usually followed by strong steady growth. So yes, recessions matter to commercial real estate – but not nearly as much as people may think.”

 

Source: GlobeSt.

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New Lincoln Dealership Proposed In Coconut Creek

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Auto magnate Terry Taylor wants to build a Lincoln dealership in Coconut Creek.

The 79,897-square-foot Lincoln of Coconut Creek would be constructed next to Infiniti of Coconut Creek, at 5501 W. Sample Road. The entire property is owned by TT of Sample LLC, led by Taylor of West Palm Beach-based dealership giant Automotive Management Services.

The company currently operates a small Lincoln dealership within the Infiniti building.

The city’s Development Review Committee heard the plans on July 14, and city staff will continue to review the application until it’s ready for the Planning and Zoning Board as well as the City Commission, said Amy Edwards, a development review specialist with the city of Coconut Creek.

The Lincoln dealership would have 29,924 square feet of showroom and office space, 49,973 square feet of automotive retail and 358 parking spaces. Penney Design Group in Bethesda, Maryland designed the project.

The only other Lincoln dealerships in Broward County are in Pembroke Pines and Pompano Beach.

South Florida is one of the busiest markets in the country for car sales, and the increase in new car values has boosted sales for many dealers. Building a stand-alone Lincoln dealership will make it easier for Taylor to provide repair and maintenance service to his customers.

 

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Lithia Motors & Driveway Pays Combined $72.27 Million For Lehman Dealership Enterprises Real Estate Assets

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Lithia Motors & Driveway paid a combined $72.27 million for the real estate assets of Lehman Dealership Enterprises, according to Miami-Dade County records.

Medford, Oregon-based Lithia announced the acquisition of the family-owned chain of nine dealerships on June 28, but didn’t disclose the price. The deeds filed in Miami-Dade list the prices of the real estate but not other assets that were likely included in the deal, such as the value of automotive inventory and the dealership franchises.

Here is how the sales from Lehman to various affiliates of Lithia Motors broke down:

  • Largo Honda, totaling 203,528 square feet on 3.7 acres at 554 N.E. 1st Ave., Florida City, sold for $22 million.
  • Doral Hyundai and Doral Genesis, totaling 40,654 square feet on 11.9 acres at 10285 N.W. 12th St., sold for a combined $26.73 million in two deeds.
  • Doral Kia, located on three acres at 10155 N.W. 12th St., sold for $6.69 million.
  • Lehman Buick GMC and Lehman Subaru, totaling 79,810 square feet on 13.7 acres at 21200 N.W. Second Ave., Miami Gardens, sold for a combined $12.97 million in two deeds.
  • Lehman Leasing, Van, Truck & Bus, totaling 11,711 square feet on 3.4 acres at 20950 N.W. Second Ave., sold for $2.69 million.
  • Lehman Mitsubishi, covering two acres at 21000 N.W. Second Ave., Miami Gardens, sold for $1.19 million.

Bill Lehman Jr. said the dealerships have nearly 500 employees and Lithia is keeping almost all of them. They had about $850 million in sales a year.

 

Source:  SFBJ

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“It’s On Fire.”: Miami Mayor Touts South Florida Economy

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Miami Mayor Francis Suarez made an appearance on Fox Business where he discussed Miami’s booming economy, referring to it as “on fire,” as the city posts repeated increases in real estate sales, an influx of new jobs, and the welcoming of tech businesses from states like California and North Carolina.

Miami in recent years has made its mark as a burgeoning tech city, being named one of the top cities in America for eCommerce business. The city has managed to carve out a niche in the cryptocurrency space, with the creation of a cryptocurrency specific to the area: MiamiCoin.

“It’s on fire,” said Suarez. “Our tax base grew by 12 percent year over year. We’ve transferred over $2 trillion in assets under-managed companies in the last two years. Our venture capital pipeline grew by 400 percent year over year. It’s amazing what following some basic principles will do for a city like keeping taxes low, keeping people safe, keeping homeless low. We are at a 2013-year low in homelessness where our tax rate is at a 1960s low and our homicide rate is at a 1950s low.”

South Florida has seen an influx of new residents from both domestic and international origins, as well as businesses moving headquarters seeking more favorable tax structures. The surge in people inhabiting the city has led to higher demand for real estate, driving prices higher while keeping the market red-hot. Miami-Dade County’s real estate market continues to skyrocket, as the Miami Association of Realtors in MArch registered the county’s third-highest month ever in terms of sales.

“If you keep people safe, you focus on quality of life, it’s an incredible difference from what people are seeing in other major cities across America. And we now live in a decentralized world where you don’t have to physically be somewhere to be able to be successful. And people like Ken Griffin are proving that.” continued Suarez. “When Citadel moved to Palm Beach initially during the pandemic, they prove that they could be a massive market maker and not have to be in New York or Chicago. And now he’s made the move. So we’re excited to have Ken Griffin and his family in Miami.”

Ken Griffin, Illinois’ richest person and founder of industry-leading investment firm Citadel, announced in June that he is relocating his company from Chicago to Miami, citing a more business-friendly atmosphere and a comparative reduction in crime.

In a memo sent to employees, Griffin noted that Florida harbors a better corporate environment due to its favorable tax structure and lack of an income tax. The move is expected to be a multi-year process and will necessitate the construction of a new office building in the downtown Miami neighborhood of Brickell.

In prior years, Griffin threatened to pull Citadel out of Illinois, referring to Chicago in 2013 as a city of “broken schools, bankrupt pensions, rising crime, a declining tax base, and public corruption.”

“Chicago will continue to be important to the future of Citadel, as many of our colleagues have deep ties to Illinois,” Griffin said in his memo to employees. “Over the past year, however, many of our Chicago teams have asked to relocate to Miami, New York, and our other offices around the world.”

Citadel is one of the most successful hedge-fund firms, overseeing $51 billion in assets and regularly outpacing competitors and the market, making a swift recovery following the 2008 recession.

 

Source:  The Capitolist

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Construction Starts Continued To Climb, But Slowdown May Be Looming For Specific Sectors

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Construction starts have remained robust this year but certain sectors could begin to see a slowdown in the coming months.

Total construction starts rose 4% in May to a seasonally adjusted annual rate of $979.5 billion, according to data released late last week by Hamilton, New Jersey-based Dodge Data and Analytics LLC. But among the major categories tracked by Dodge, nonresidential building starts was the only one that increased, by 20%, while residential starts fell by 4% and nonbuilding starts dropped 2% during the month.

It’s a signal homebuilders are starting to pull back on what had been an active construction pipeline through the Covid-19 pandemic, as demand for housing wanes amid a rising-interest-rate environment.

Year-to-date, total construction is 6% higher in the first five months of 2022 compared to the same period in 2021. In that period, residential starts have actually grown 3%, suggesting the tide is only starting to change on the homebuilding front.

Nonresidential building starts have increased 17% annually in the first five months of the year, while residential starts are 5% down.

Richard Branch, chief economist at Dodge Construction Network, said in a statement the construction sector has become increasingly bifurcated in the past several months.

“Nonresidential building construction is clearly trending higher with broad-based resilience across the commercial, institutional and manufacturing spaces,” he said. “However, growth in the residential market has been choked off by higher mortgage rates and rapidly falling demand for single-family housing. Nonbuilding starts, meanwhile, have yet to fully realize the dollars authorized by the infrastructure act.”

Branch said while the overall trend in construction starts is positive, the very aggressive stance taken by the Federal Reserve to combat inflation risks slowing momentum in construction.

Ken Simonson, chief economist at the Associated General Contractors of America, said in an interview he felt homebuilders are in much more precarious position right now than multifamily or nonresidential construction.

Ripple effects on construction starts from the passage of the federal $1.2 trillion Infrastructure Investment and Jobs Act late last year hasn’t been felt yet. Simonson said for a while he’s expected contractors wouldn’t go to work on any IIJA-funded projects until late 2022 or early 2023, which he said he continues to expect. When that occurs, that’ll bolster the pipeline for the nonbuilding sector.

Outside of single-family home construction, multifamily and warehouse development — both of which have seen big growth through the pandemic — may be the most vulnerable to a slowdown, Simonson said.

Seattle-based Amazon.com Inc.’s (NASDAQ: AMZN) disclosure this spring that it had excessive warehouse capacity is one signal of slackening demand, he continued.

“Now that there’s doubt about how strong consumer demand is going to be for goods, I think other businesses are going to slacken their buying and building of warehouse space,” Simonson said.

Amid rising costs and interest rates, it’ll become more challenging for multifamily developers to pencil out deals, also making it more vulnerable than other sectors, he added.

One of the sectors likely to boom: manufacturing. New automotive plants, and large-scale facilities to support the burgeoning electric-vehicle industry, will translate to new business for general contractors nationally, Simonson said.

 

Source:  SFBJ

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