In the News—Week of November 11, 2024
Deal of the Week
An Arizona-based developer has completed construction on a 128-unit build-to-rent community in McKinney, TX, and has closed on a new loan of approximately $23 million. The transaction was closed by Vice President and Senior Escrow Officer, Bryan Selna.
National
Fed’s cut in interest rates likely to kick off uneven recovery for CRE
Commercial real estate may be on the cusp of recovery, driven by the Federal Reserve’s recent interest rate cuts, CNBC reports. This shift in monetary policy has sparked optimism in the sector, potentially leading to increased deal activity and improved property valuations. “Once the Fed starts to cut, they’ll continue along that path,” says Alan Todd, head of commercial mortgage-backed security strategy at Bank of America. However, the recovery is expected to be uneven across different subsectors. While multifamily housing shows promising signs with rising demand and stabilizing vacancy rates, the office sector continues to face significant challenges, including high vacancy rates and structural issues stemming from the shift to remote work.
National
Manhattan court gives Cooper Union control of iconic Chrysler Building
Cooper Union has won a significant legal battle against RFR, a company owned by real estate magnate Aby Rosen, concerning the iconic Chrysler Building, The Architect’s Newspaper reports. The Manhattan Supreme Court ruled in favor of Cooper Union, granting them the right to collect rent directly from the building’s tenants. The Cooper Union is a private college that specializes in science and art, and is located in Cooper Square in Lower Manhattan. Until 2014, each admitted student attended tuition free. Since then, each student attends with at least a half tuition scholarship, without about half attending free. Lease payments from the land under the Chrysler Building funds much of that tuition aid. This decision came after Cooper Union evicted RFR for defaulting on ground lease payments, leading to a $21 million lawsuit for unpaid rent. Despite the legal turmoil, Cooper Union’s interim president assured that student scholarships and tuition-free education plans would remain unaffected, citing the school’s robust financial planning and reserves.
National
San Francisco helps nonprofits buy bargain real estate in downtown
San Francisco is helping nonprofits acquire distressed real estate in downtown areas, The San Francisco Standard reports. The city’s API Equity Fund, established in 2022, provides financial support for nonprofits serving Asian American and Pacific Islander communities to purchase and improve facilities. One beneficiary, the Bayanihan Equity Center, recently acquired a building in the Filipino Heritage District at a significant discount, thanks to this program. This initiative is part of a broader trend in which nonprofits and community organizations are taking advantage of the current real estate market downturn.
National
Microsoft purchases 300 acres in Michigan for possible data center
Microsoft recently acquired over 300 acres of land in Gaines Township, Kent County, Michigan, with plans to potentially develop a data center, FOX17 reports. This development looks to be part of Microsoft’s broader expansion of its data center network across the United States, although Microsoft has not submitted any concrete plans. The move aligns with the goals of a major economic development organization in west Michigan, The Right Place. The organization has a 10-year strategy to establish west Michigan as a prominent tech hub in the Midwest. “With one of the leading tech companies in the world taking notice, we’re well on our way there,” The Right Place’s CEO, Randy Thelen, says.
Arizona
Office vacancy rate in Phoenix area drops for the first time in five years
For the first time in nearly five years, the vacancy rates in Phoenix area office market decreased, AZ Big Media reports. Figures from JLL’s Q3 2024 report show a decrease by 10 basis points during the third quarter to 25.1%. The improvement is attributed to a slowdown in move outs. Asking rents rose, increasing by 3.1% year-to-date after an earlier decline. There is an increased interest in pre-built and high-quality spaces and a growing demand for locations with amenities. “We’re seeing Phoenix’s positive office market trends play out in real-time,” says Trevor Pratt, managing director at JLL.
Arizona
Lincoln to turn office building near Sky Harbor into industrial space
Lincoln Property Company has announced plans to transform an office building in Tempe near Phoenix’s primary airport into an industrial campus called Sky Harbor Logistics, AZ Big Media reports. Lincoln acquired a 16.25-acre property for $18.3 million, which currently houses a one-story office building and parking garage. Lincoln intends to demolish these structures to make way for two identical 127,000-square-foot Class A industrial buildings. This redevelopment project, set to begin in the second quarter of 2025, aims to create a modern logistics facility strategically located near major transportation hubs and Arizona State University.
