What I’m Reading
Hybrid: Retail stores are increasingly adopting a hybrid model, whereby they accommodate both in-store shoppers and the fulfillment of e-commerce orders, creating a new asset class that sits somewhere between retail and distribution. This is likely to lead to major changes in the next few year. For one, checkout lines could be eliminated. At the same time, humans will still be needed on the sales floor, dedicated to customer-facing roles, while a separate workforce will be responsible for handling order fulfillment in the back of the store. CBRE
In the Money: A total of 17.8 million U.S. residential properties were considered equity-rich – under 50% LTV – during the fourth quarter of 2020, according to Attom Data Solutions’ Q4 2020 Home Equity and Underwater Report. This is up substantially from 26.7% a year ago. Meanwhile, the number of mortgaged homes considered seriously underwater declined during the fourth quarter to 5.4 percent of all mortgaged homes, down from 6 percent in Q3 2020 and down from 6.4 percent in Q4 2019. This only strengthens my view that we will not have a foreclosure crisis despite spiking forbearance and delinquency. Attom Data Solutions
Multiple Threats: While the work from home trend is the biggest threat to the office market, other trends like slipping job growth in office-dominant industries, increasing real interest rates and a general trend towards greater space efficiency are also causes for concern. Globe Street
Squeezed: A new report by Trepp is sounding the alarm on some potentially large CMBS losses this year as retail and hospitality continue to suffer and gateway city office and multi-family feel more pain as well. The good news is that lenders are still selectively providing flexibility and forbearance. The bad news is that lenders are taking this opportunity to tie up borrowers and make any potential future default under the loan painful. Trepp
Mixed Bag: COVID-19’s hit to state and local governments is smaller than many had feared but costs from fighting the virus went up substantially as well. Wall Street Journal
Chart of the Day
Industrial has overtaken office as a share of commercial real estate transactions in the Americas.
Source: Real Capital Analytics
WTF
Missed the Mark: In the latest example of baby showers gone horribly wrong, expectant parents in Michigan planned to fire a cannon to announce the arrival of their baby at a shower. Instead, the gunpowder inside the cannon exploded, fracturing its metal frame, launching shrapnel into the air and killing one of their guests. Washington Post
Please Make it Stop: Over the weekend, a Washington Post editorial asked if the Tampa Bay Buccaneers nickname was “problematic” because it glorified pirates. At this rate, sports teams will soon only be named after inanimate objects like paper clips. Enough already. The Washington Post
Basis Points – A candid look at the economy, real estate, and other things sometimes related.
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