Inflation, uncertainty, tightening, recession — these are just a few of the many terms thrown around in recent months, placing investor pessimism on display. However, the economy is sending mixed signals about its health.
While several large and attention-generating companies have recently completed or announced rounds of layoffs, nationwide job growth continues to be relatively impressive. According to the Bureau of Labor Statistics, the US economy added 311,000 jobs in February, falling from a January tally of 504,000 but far from labor market loosening.
Unemployment claims have jumped to begin March after falling to a nine-month low in January, but job openings remain robust, with more than 10.8 million open positions across the country.
However, investor jitters aren’t without merit. Over the past several weeks, a complex web of economic data, business news, and policymaker statements have only blurred the outlook further.
Let’s start with inflation. The post-pandemic inflation saga has now stretched into its third calendar year, and while there are signs that price growth is slowing, policymakers will be keen on preventing embers from reigniting the flame.
After peaking at a generational high of 8.9% in June of last year, the Consumer Price Index (CPI) has improved for seven straight months, declining to a 6.0% annual inflation rate in February. Still, even if monthly inflation remained flat (0%) through the next six months, annual inflation would still be above the Fed’s 2% target.
Despite rising uncertainty, early 2023 data suggests that at least some of last year’s momentum is carrying into the new year, dampening the likelihood that we are already in recession. Still, policymakers at the Federal Reserve are warning that more good news about the economy may be increasing the risk of a hard landing. As the US economy charges forward, it risks placing further upward pressure on prices, backing the Fed into a corner where higher rates are their only tactical option.
Minutes from the FOMC’s January policy meeting alongside a March 7th speech by Fed Chair Jerome Powell reflected the committee’s willingness to again “increase the pace” of rate-hikes if, in Powell’s words, the “totality of the data were to indicate” such was needed. Fed officials’ increasingly hawkish sentiment has reinforced the consensus that policymakers will be going the distance on fighting inflation, even if markets sit in the crosshairs.
However, a new development may throw water on theFed’s plans. On March 10th and in the days since, the collapse of Silicon Valley Bank and Signature Bank became the largest US bank failures since the 2008 financial crisis — primarily due to a lapse in strategy for today’s rising interest-rate environment. While regulators have stepped in and given public assurances to help affirm faith in the financial system, the market is betting the SVB failure forces Jerome Powell and company to pivot their monetary policy.
According to the Chicago Mercantile Exchange’s Fed Watch Tool, futures markets are pricing in a 58.3% chance of a 25-basis point hike in March and a 41.7% chance that the committee will hold rates constant at 450-475 (as of the morning of March 13th, 2023).
For context, just a few weeks ago, an overwhelming majority (90.8%) of futures traders projected a 25-basis point rate increase in March, driven toward consensus by improving inflation metrics and a gradual reduction in the Fed’s recent rate hikes. The consensus then shifted to forecasting a 50-basis point hike following Powell’s hawkish March 7th press conference — only to move back to 25 bps following the SVB failure.
Overall, the state of the US economy in 2023 is, well…complicated. And we didn’t even mention Washington’s ongoing debt ceiling dilemma. As investors look through their windshields, factoring in this increased uncertainty will be necessary. Receding market panic from the SVB/Signature collapse alongside inflation’s tepid deceleration in February increases the likelihood that policymakers will raise rates by at least a 25 basis points later this month. If the above assumption holds, the development should provide markets with a better sense of direction moving forward and reduce short-term uncertainty.
This new office in North County San Diego will be an addition to the SVN Vanguard offices in San Diego, Santa Ana, Long Beach, Los Angeles.
SVN Vanguard is an independently owned company that is part of the 200+ companies in the SVN global network. SVN Vanguard is one of largest companies in the SVN system and is currently ranked #3 globally.
SVN Vanguard offers commercial real estate sales and leasing, property management and maintenance services. Joe Bonin will be the North County office Managing Director and Tony Ying will provide Regional Manager support.
“SVN Vista is now officially open. Servicing commercial real estate in North County San Diego including San Marcos, Escondido, Encinitas & Poway”
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In February, the national VODI grew 29%, increasing by 13 points to 58.
By Les Shaver | March 25, 2021 at 07:03 AM | Originally Published on GlobeSt.com
One year after the COVID lockdowns began, demand for office space is finally approaching pre-pandemic levels.
The national VTS Office Demand Index (VODI), which tracks tenant tours, both in-person and virtual, of office properties across the nation, posted significant gains in January and February and is now 38% lower than it was just before the pandemic. By comparison, it was 85% below pre-pandemic levels last May.
In February, the national VODI grew 29%, increasing by 13 points to 58. “While we saw some growth in demand in the back half of 2020, the exponential increase in the first two months of 2021, combination with the announcement from the Biden Administration that all Americans will be eligible for the vaccine by May 1, 2021, is providing confidence that a meaningful recovery is on the horizon.” VTS CEO Nick Romito said in a prepared statement.
February also marked the first month since October 2020 where demand grew in all of the office markets tracked by VODI. Previously hard-hit markets New York City, Seattle and Washington, D.C. led the growth.
In New York, demand for office space jumped 120% in 2021 and is down 40% from pre-pandemic levels. The VODI has steadily risen from 35 in December to 77 in February after hitting a low of 7 in May 2020.
Last year, some observers, like Michael P. Feldman, CEO of Choice New York Cos., predicted that the office situation would improve in the city.
“At some point, we’re going to have our arms wrapped around this thing,” Feldman said at the time. “And most things will go back normal. To me, it is going to look more like the old normal than most people think.”
While Seattle experienced seasonal declines in Q4 2020, demand is now up 182.6% in 2021. It rose 22 and 20 VODI points in January and February, respectively, to 65. The city’s leasing demand is now only down 24% from pre-crisis levels one year ago.
Two California markets, San Francisco (down 5%) and Los Angeles (down 18%), have almost regained their losses since the beginning of the pandemic. San Francisco’s VODI picked up 38 VODI points from 15 in November to 53 in February, jumping 253% over the last three months. In mid-2020, there was almost no demand in the city.
“While it is encouraging that San Francisco has made up almost everything lost since the pandemic started, it is important to remember that demand in San Francisco was depressed leading into the pandemic, VTS Chief Strategy Officer Ryan Masiello said in prepared remarks.
San Diego office space in March 2021 was half of what it was pre-pandemic. This market is experiencing fits and starts with relative stability now in 2022 – now at 87% of normal.
Not every hard-hit market is experiencing rapid recovery, though. While Boston and Chicago gained 3 and 8 index points in February, respectively, they are coming out of a period of flat or negative growth. VTS thinks growth could be “latent as opposed to absent in these cities.”
VTS isn’t the only source seeing strength in the office market. Investor KBS says that there will always be demand for office space, but with the vaccine rollout and an end in sight for the pandemic, it is bullish on office activity this year.
“Office buildings are not going away any time soon,” Giovanni Cordoves, Western regional president, tells GlobeSt.com. “As long as workers have a need for community and employers strive for ingenuity and collaboration, there will be a demand for office space. Additionally, as the COVID-19 vaccine becomes more widely available and people feel safe and comfortable, well-amenitized office properties will once again be in high demand.”
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For the first time in years, retailers are opening more stores than they are closing, with 3,199 store opening announcements already this year.
By Kelsi Maree Borland | March 22, 2021 at 06:41 AM | Originally Posted on Globest.com
This year, more retail stores will open than close, according to a report from Coresight Research published on CNBC. Retailers have collectively announced the openings of 3,199 but only 2,548 store closures. It is the first time in years that store openings have surpassed store closures.
This is a significant turnaround from 2020, when 8,953 stores shuttered, while only 3,298 opened, largely due to the pandemic. However, 2021 store openings are on track to surpass activity in 2019 and 2018, when 4,548 and 3,747 stores opened doors, respectively, according to research from Coresight Research.
Much of this is no doubt due to the expected surge in consumer spending as stimulus checks hits bank accounts. Also, as the COVID vaccines continue to roll out, stores are likely to see more foot traffic.
CNBC also points out that the surge is store openings could be the result of renewed expansion plans from a year ago. Ulta Beauty, Sephora, Dick’s Sporting Goods, Five Below and TJ Maxx are all moving forward on expansion plans that were halted during the pandemic. Meanwhile, other retailers are experiencing organic growth. Athletic brand Fabletics has announced plans to open 24 stores across the US this year.
Another key factor are the low retail rents in most major markets. After the mass store closures last year, retail rental rates have fallen dramatically across the country and particularly in core markets like New York City, where retail rents fell as much as 25%, according to research from REBNY. Eight retail corridors have reported the lowest retail rents in a decade. Of the 17 total retail submarkets, 11 have seen a rise in the availability rate from 6% to 67% year-over-year. Landlords have also increased concessions to attract retailers and fill spaces.
Stores are also experimenting with new formats as part of these expansion plans. This includes signing short-term leases or using smaller storefronts. Burlington Coat Factory, for example, is opening 75 net new stores this year, and a third will be 25,000-sqaure-feet, a significant decrease from the company’s standard 50,000- to 80,000-square-foot format.
Other retailers are exploring pop-up strategies. Gucci and North Face partnered last month to launch a pop-up retail shop in Williamsburg, Brooklyn. The collaboration signed a 4,000-square-foot lease at 134 N 6th Street, a property owned by L3 Capital. The pop-up was one of five across the country, which included an immersive environment. At the time, Ariel Schuster, a broker with Newmark that worked on the transaction, said the deal signaled a recovery of the luxury retail market and role that pop-ups could play in revitalizing the sector.
Are you looking for commercial real estate for lease? Visit our Properties page for our inventory of retail, office, and industrial in Orange County, San Diego and greater Southern California.
Results for the third quarter appear positive, though other metrics for apartments activity were mixed.
By Rayna Katz | October 02, 2020 at 07:18 AM
Apartment leasing appears to be on the rebound.
The indicator showed signs of improvement in the third quarter, according to a new report from RealPage, and other recent data also showed healthy activity in the space, possibly pointing up the beginnings of recovery for the second half of 2020.
Greg Willett, chief economist at the real estate technology and analytics firm expressed cautious optimism. “While the US economy has a long way to go before it’s fully healed, there’s enough job production to allow new household formation to return in some areas, so apartment demand is back,” he said in prepared remarks.
Occupied apartments climbed by nearly 147,000 units, outpacing absorption in the second quarter by more than four times. Even more promising, demand in Q3 increased by 8% year-over-year.
This research comes on the heels of AppFolio data that also found improvement in apartment leasing after the first six weeks of the pandemic, following a sharp decline during the early days of COVID-19’s arrival in the US.
“At the outset of the pandemic, as people adjusted to stay-at-home orders and physical distancing mandates across a number of states, our early data suggested a significant decrease in lead volume,” said Stacy Holden, industry principal and director. “However, after about six weeks, leasing activity largely rebounded to expected levels. People still want to move to places that meet their needs.”
Societal trends, such as the surge in both working from-home and remote learning, also drove leasing up. “With many people having had the ability to work remotely this year, the need to live close to the office may have diminished for some,” she explained.
Still other metrics for recent apartment activity paint a mixed picture.
US effective asking rents as of the third quarter are off 1.2 percent from the rates seen a year earlier, according to RealPage. More recently, the ApartmentList reported that rents have dropped in nearly half of the nation’s top 100 markets.
Originally posted on GlobeSt.com
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