Apartment Builders Press Pause Due to High Costs, Little Funding

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Good morning. Higher interest rates and flattening rents are causing widespread delays in apartment construction projects across the U.S. Plus, Manhattan office leasing levels surged 70% in May.

Today’s issue is brought to you by Redwood Living.

Market Snapshot

CONSTRUCTION FREEZE

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• Move over NYSE: Citadel and BlackRock support the creation of a new national stock exchange in Texas, with TXSE raising $120 million from over two dozen investors.

• On thin ice: 67 US banks have CRE exposure that’s over 300% of their total equity, Flagstar Bank (FBC) and Zion Bancorp (ZION) chief among them.

• Bills and thrills: JPMorgan (JPM) projects that the Treasury bill market share could exceed 20% by 2026 as demand rises from key investors.

• Nobody’s market: US homebuyers face a disappointing key season with mortgage rates over 7%, driving sellers to cut asking prices as inventory grows.

• Shipping the REIT: Defunct cargo hauler Yellow Corp is considering creating a REIT with its remaining assets, as most of its valuable properties already sold for $2B.

• Brokerages diversify: Colliers (CIGI) plans to acquire Englobe Corp for $475M, expanding its business into engineering and environmental services to generate diverse revenues.

• Downtown dazzle: Dallas ranks 11th in Business Journal’s nationwide Downtown Vitality Index, leading all Texas metros in terms of post-pandemic recovery, with a 58.41 score.

• Housing hunger: NYC's Section 8 voucher applications topped 150K within 12 hours after opening up again for the first time in 15 years, highlighting the city’s severe affordable housing crisis.

• Sky-high living: After a $10.25M site purchase, Aventon Companies began construction of the 346-unit Aventon Lake Conway near Orlando Airport.

• Vegas revival: Developers are pivoting to build more apartments in the Las Vegas Strip and in downtown amid high supply in suburbs, upping renter competition.

• Downtown development: Rabsky Group's 625 Fulton Street in Downtown Brooklyn secured $485M in financing for 1,098 units with retail.

• Manufacturing momentum: The manufacturing sector faces inflation and slow demand as vacancies normalize, with $233B in annualized construction spending signaling future growth.

• Trash talk: Waste Management is set to acquire Stericycle, a medical waste company, with the potential deal involving hundreds of industrial properties across the country.

• Manufacturing meltdown: US factory activity contracted in May as the ISM index dropped to 48.7, while new orders plummeted to 45.4.

• Quantum leap: Big Blue's (IBM) potential quantum computing expansion in Illinois could solidify the state as a new tech hub, while creating around 1K jobs.

• Retail Renaissance: Federal Realty Investment Trust (FRT) acquired Virginia Gateway, a 665KSF shopping center, for $215M, enhancing its Northern Virginia portfolio.

• Can’t beat those prices: Trader Joe's plans to open 24 new stores nationwide, including 8 in Southern California, maintaining steady growth amid intense competition.

• Greasy grills: Bankrupt Rubio's Coastal Grill closes 37 SoCal locations, including 25 in LA and Orange counties, although 86 restaurants remain open.

• Leasing leap: Manhattan office leasing levels surged 70% in May, with 2MSF leased in Midtown and 3MSF citywide.

• Another one bites the dust: A $28M CMBS loan for Harlequin Plaza in Greenwood Village, CO, faces special servicing due to default.

• Check the fine print: AAA-rated bond investors at 1740 Broadway faced a $40.3M loss (-25.6%), despite previous appraised values.

• Booking blues: American consumers, increasingly poorer due to inflation, are tightening their belts. Low-income earners booked 0.5% fewer hotel rooms in April, perhaps a sign of things to come.

• Buying spree: Blue Suede Hospitality Group bought the historic Blue Moon Hotel in Miami Beach for $16.6M, marking the firm’s third acquisition in the area.

📈 CHART OF THE DAY