Industrial Construction Nosedives as Vacancy Rates Surge

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Good morning. Industrial real estate construction plunged 43% in Q3 2024, marking the sharpest annual drop since 2008, while vacancy rates continue to rise, reflecting a cooling demand post-pandemic.

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• Doubling down: Blackstone’s BioMed Realty purchased a $361.5M ground lease in Cambridge's Kendall Square from MIT, expanding its life sciences footprint.

• Recession risk: Goldman Sachs lowered the probability of a US recession in the next year to 15%, citing strong payroll growth and a resilient labor market.

• Distressed debt: Hedge fund Deer Park is launching a $500M fund to buy discounted commercial property debt in the office market, seeing it as a lucrative opportunity amid a wave of defaults.

• Power duo: Former Goldman Sachs CFO Stephen Scherr joined Pretium as co-president, hired to aid its growth as a $55B real estate powerhouse in the single-family rental sector.

• Reap’s Rescue: Unlike traditional preferred equity investments, Reap Capital takes over operational control of each asset in their Rescue Capital Fund and your capital gets priority over all existing equity. (sponsored)

• Slam dunk: NBA players Terry and Tobias Harris are planning a 90-unit affordable housing complex on Santa Monica Boulevard in Los Angeles.

• Harbor hype: In Baltimore, neighborhoods around Inner Harbor are likely to experience significant growth over 10 years, with an ongoing upward trend.

• Rising up: Moyer Properties secured a $29M loan to build an 84-unit multifamily project in Chicago’s Lincoln Park, with completion set for March 2026.

• Design boom: Senior living communities are evolving to attract baby boomers with luxury amenities, intergenerational spaces, and tech-driven designs while balancing affordability.

• Digital expansion: Blue Owl Capital is in talks to acquire IPI Partners, a data center investment firm, for about $1 billion, with a potential deal announcement later this month.

• Sun Belt boom: Bixby Capital Management acquired a coveted 533.63 KSF, 78% occupied industrial portfolio in Mesquite, TX thanks to CBRE.

• Sky-high investments: JLL Capital Markets (JLL) secured a $115M loan for a 2 MSF industrial park at Dallas-Fort Worth Airport, featuring 399 dock doors.

• Shopping predictions: Retail analysts predict a busy holiday season after recording 2.7% more foot traffic in August and following strong YTD retail performance.

• Monopoly madness: Mr. Monopoly's immersive board game experience secured a nearly 50 KSF lease in NYC for around $160 PSF.

• Retail Renaissance: Gen Z favors malls, spurring 75.4% growth in sector absorption and a 2.6% rise in rents as retailers continue to adapt to digital demands.

• Net lease trends: Cap rates for single-tenant net lease properties in the American market increased slightly to 6.73% in 3Q24.

• Orange County classic: Google (GOOGL) renewed its 196.2 KSF office lease in Irvine, CA, the largest office deal in Q3 for Orange County.

• Strong tenants preferred: Prologis (PLD) bought a Siemens-occupied office park in Fremont, CA, for $71.3M, or around $244 PSF, with an undisclosed sale-leaseback agreement.

• AI powering NYC: OpenAI secured a 90KSF space in Soho's Puck Building as the booming AI sector boosts NYC’s office market with a 25.1% jump in deal volumes.

• Market turbulence: Houston's office leasing market slumped in Q3 as transactions plummeted, with net absorption at -773 KSF, excluding one major property.

• Sky-high stays: Airport hotels are once again in high demand in mid-sized US cities with growing passenger traffic, prompting more development.

📈 CHART OF THE DAY

FACT OF THE DAY

The largest industrial building in the world is Boeing's Everett Factory in Washington, covering 4.3 million square feet. It's so massive that clouds have been known to form near the ceiling due to the building’s unique climate!