CoStar: L.A. Fires Damage $1.9B in Commercial Real Estate

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Good morning. The recent Palisades and Eaton fires in Los Angeles have devastated 4.5 million square feet of commercial property valued at $1.9 billion, with multifamily and retail sectors taking the hardest hits.

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Market Snapshot

WHAT’S THE DAMAGE?

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• Investor optimism: A CBRE survey revealed that 70% of CRE investors plan to buy more CRE in 2025, driven by market recovery and favorable pricing despite challenges from high interest rates.

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• Inflation risks: BlackRock warns high inflation is the world’s biggest risk, highlighting the need for private sector investment in AI infrastructure and energy-conscious data centers.

• Investor fraud: Colliers (CIGI) was sued over an alleged $10M investor fraud with inflated values, bankrupt tenants, and misleading marketing tied to medical office deals in Utah and Texas.

• Federal overhaul: President Trump appoints tech entrepreneur Stephen Ehikian to lead the GSA and oversee its 360 MSF real estate portfolio, intending to cut government property footprints.

• What happens in Vegas: Starwood Property Trust (STWD) bought 151 single-family homes in Las Vegas for $58M, raising concerns over institutional investors driving up local housing costs.

• Rent slowdown: US rent growth fell sharply in 2024 to just 0.8%, with high vacancy rates and regional disparities driving market shifts, while affordability challenges persist in coastal markets.

• Market test: Noah Properties has listed its 237-unit North Oak Lofts in Northwest Chicago, testing the multifamily market amid high interest rates and softening property valuations in urban areas.

• Historic conversion: Sunlight Development and NuVerse secured a $99M loan to transform the landmarked 95 Madison Avenue in NoMad into 65 luxury condos, with demolition already underway.

• Olympics outlook: Waterton purchased the 347-unit G12 apartment complex in downtown Los Angeles for $122M, capitalizing on the area’s growth ahead of the 2028 Olympics.

• Industrial boom: Savannah's industrial market doubled in size over 4 years, fueled by Hyundai's massive EV plant and supplier growth, with the Port of Savannah's $4.5B expansion solidifying the city’s status as a top US logistics hub.

• Gambling slowdown: The Las Vegas industrial vacancy rate surged from 3.4–9.2% in 2024, the sharpest rise since the Great Recession and cooling both rent growth and investment momentum.

• Sorry, workers: Amazon (AMZN) will close 7 Quebec warehouses and lay off 1.7K workers, shifting to third-party logistics providers to handle deliveries in the province.

• Retail retreat: Bloomingdale’s (M) will close its 339 KSF store at San Francisco Centre in March, as the struggling mall faces a foreclosure auction and broader downtown retail decline.

• Retail expansion: Cohen & Steers and Phillips Edison acquired Oak Grove Shoppes, a 142 KSF grocery-anchored retail center in Orlando, marking their second purchase in a $300M joint venture.

• Strategic stake: Paramount Group (PGRE) sold a 45% stake in its 36-story Midtown office tower, 900 Third Ave, for $210M, highlighting the demand for Class A properties in particular.

• Office revival: Return-to-office mandates and corporate relocations are driving demand for North Texas Class A office space, while older Class B and C buildings continue to face high vacancy rates.

• In it for the long haul: IBM (IBM) signed a 15-year lease to add 93 KSF at SL Green’s (SLG) One Madison Avenue, bringing its total footprint in the tower to 362 KSF, with asking rents at $110 PSF.

• Football asdf: Super Bowl LIX in New Orleans is projected to drive record hotel revenues, with ADR and RevPAR expected to climb 35% and 43%, respectively.

• Historic charm: The Wetenhalls, owners of Palm Beach's Colony Hotel, bought East Hampton's Hedges Inn, vowing to preserve its historic charm while adding a restaurant, trivia nights, and more.

📈 CHART OF THE DAY