US Retail Closures Up 70%, Thousands More to Follow

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Good morning. US retail closures surged 70% in 2024, driven by e-commerce competition and rising costs. CBRE predicts that institutional capital will flow back, setting the sector up for gains in the New Year.

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• Distressed loan sale: Flagstar Financial (FLG) is selling $343M in distressed NYC office and retail loans, reflecting ongoing challenges in the city’s commercial real estate sector.

• Rate outlook: The Federal Reserve cut interest rates by 25 basis points, capping a year of easing but signaled a cautious approach for 2025, triggering a sharp stock market drop.

• Energy exemptions: DC lawmakers approved amendments to exempt financially distressed property owners from meeting energy efficiency benchmarks for a 6-year cycle under the BEPS program.

• Fear and Greed: The Burns + CRE Daily Fear and Greed Index crossed into expansion territory for the first time in several quarters.

• Foreclosure struggles: RFR Holding (RFR) faces another foreclosure on retail units at 188 East 78th Street, adding to a string of defaults totaling over $300M from Signature Bank's troubled loan portfolio.

• Economic momentum: The 2025 economic outlook brightens, with Oxford Economics now projecting Q4 growth at 2.5%, a significant leap from last year's forecast of 0.7%.

• Multifamily resilience: Multifamily properties are set to outpace other CRE sectors in 2025, showcasing superior NOI growth and stability amid market challenges.

• Housing shifts: Single-family construction surged in 2024, led by the West and Midwest, while multifamily permits fell 16.2% YTD, reflecting shifting developer priorities and regional disparities.

• Brave new world: As delinquencies rise, multifamily landlords are using AI tools like EliseAI to automate rent collection and boost cash flow, though ethical concerns about tenants persist.

• Breathing new life: Hankey Capital proposed a new 8-story, 129-unit apartment project at 2901 West Santa Monica Blvd, advancing a former builder’s remedy project.

• Office to apartments: Irvine Company will convert 107 KSF of offices and build two new buildings at MacArthur Court in Newport Beach, creating 700 apartments, part of a broader housing initiative.

• Affordable boost: Bridge Housing secured $71.5M through bond financing to develop HollywoodHub, a 224-unit affordable housing project, one of the largest income-restricted developments in Portland.

• E-commerce rebound: A logistics firm’s 600 KSF lease at Majestic Realty's Grand Crossing South industrial park in LA marks a major milestone in the recovery of e-commerce-driven industrial demand.

• Home Depot expansion: Trammell Crow and Realty Income (O) have started a $100M, 655.2 KSF industrial facility for Home Depot (HD) in Stockton, CA, which is set for completion in 2026.

• Industrial investment: STAG Industrial acquired the fully leased 5 South Commerce Center in Salt Lake City, a 172.9 KSF Class A industrial property developed by ViaWest Group in 2023.

• Merger fallout: The blocked Kroger (KR) and Albertsons (ACI) merger is a win for landlords that rely on grocery anchors, preserving tenant stability and avoiding widespread closures.

• Essex deal: Deutsche Bank (DB) acquired office and retail condos at 180 and 202 Broome St. in Manhattan’s Essex Crossing for $237M, securing 350 KSF of space in the $1.9B mixed-use development.

• Debt troubles: CGI Merchant’s 55 Miracle Mile property in Coral Gables has been placed into special servicing due to delinquency on a $25M CMBS loan.

• Luxury launch: Landau Properties secured a $74M loan to develop One Kane Concourse, a 126 KSF Class A boutique office and retail project near Bal Harbour Shops, set for 2026 completion.

• Turnaround strategy: Ashford Hospitality Trust (AHT) unveiled its "GRO AHT" plan to boost EBITDA by $50M through layoffs, pay cuts, revenue audits, and efficiency measures.

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