Net Lease News

Net Lease News

Week of November 14th 2022

MARKET

FED’S BOSTIC: READY TO ‘MOVE AWAY’ FROM LARGE RATE INCREASES AT NEXT MEETING (WTVB)

• Atlanta Federal Reserve President Raphael Bostic said Saturday he is ready to move away from three-quarter-point rate hikes at the Fed’s December meeting and feels the Fed’s target policy rate needs to rise no more than another percentage point to tackle inflation.
• That would set the Fed policy rate at a range between 4.75 and 5%, slightly below the peak rate expected by investors. It is currently set in a range between 3.75% and 4%.
• But at some point, he said, the Fed would need to pause and “let the economic dynamics play out,” given that it may take what he estimated as anywhere from 12 to 24 months for the impact of Fed rate increases to be “fully realized.”
• One thing the Fed should guard against, Bostic said, is any temptation to cut rates before inflation is “well on track” to fall to the Fed’s 2% target, even if the economy were to “weaken appreciably.”

CRE OUTLOOK STILL MIXED DESPITE APPARENT INFLATION SLOWDOWN (GLOBEST)

• Headline CPI increased 7.7 percent over the 12 months ending in October, the smallest year-over-year increase since January of this year. While the deceleration is notable, the downshift is unlikely to be enough to fend off another hike in the overnight lending rate in December.
• October’s inflation news offers a “mixed outlook” for retail CRE: while rent growth has improved and vacancy has tightened over the last year, prices continue to keep pace at restaurants and grocers. Gas prices also ticked up in October after three months of decreases, and higher energy bills are predicted to constrain consumer spending entering the holiday shopping season.

INDUSTRIAL

PROLOGIS POWERS AHEAD WITH TWO EV TRUCK CHARGING INSTALLATIONS (GLOBEST)

• Prologis is helping its logistics warehouse customers transition their commercial fleets to zero emissions transportation and to that end it has unveiled two significant electric truck charging installations as part of its Prologis Mobility platform.
• The two charging sites in Santa Fe Springs and City of Commerce, Calif., will enable Performance Team, a leading national logistics company, to simultaneously charge up to 38 of its Volvo VNR Electric Class 8 battery-electric trucks.
• Prologis Mobility is also working on other options of sustainable energy, such as hydrogen fuel-cell vehicles and compressed and renewable natural gas.

WALMART DEPLOYS ROBOTICS TO COMPETE WITH AMAZON IN FIRST OF NEW FULFILLMENT CENTERS (COSTAR)

• The 1.1 million-square-foot facility features robotics, machine learning and automated storage resulting in increased productivity and better service for customers and faster delivery times.
• Retailers including Walmart, Amazon and Target are streamlining supply chains to more quickly and efficiently fulfill online orders. Online giant Amazon already has a number of highly automated mega warehouses across the nation.
• The next high-tech fulfillment centers are slated for: McCordsville, Indiana, 2.2 million square feet, opening next spring; Greencastle, Pennsylvania, 1.5 million square feet, set to open in 2024; and Lancaster, Texas, 1.5 million square feet, slated to open next year.

RETAIL

RETAIL EMBRACING RIGHTSIZING BY RESIZING (GLOBEST)

• The trend of rightsizing by resizing stores is picking up steam. Many retailers are now incorporating small-format stores into their fleets. Retailers can tailor these small-format stores to target a specific demographic, create a personalized shopping experience, or experiment with a new brand direction.
• Small-format stores can also serve as fulfillment centers for click-and-pay shopping and as a location for returns, all while fostering brand awareness and customer engagement.
• Thanks to their smaller size, these stores can help companies expand their reach in urban centers and other highly priced real estate markets while lowering overhead costs.

RETAILERS SHOW SIGNS OF TURNAROUND AS AVAILABILITY HITS RECORD LOW (BISNOW)

• Available retail spaces are getting tough to come by, indicating that U.S. retail availability fell by nearly a full percentage point year-over-year to 5% in Q3 2022, the lowest level since 2005.
• That shortage of available space is creating more favorable conditions for retail landlords and shopping center operators and making it more difficult for tenants to get a good deal, unless they’re coming from a strong financial position.
• The high interest rate environment, combined with pricey construction materials and sparse labor, have warded off potential new development, keeping supply constricted.