Net Lease News

Net Lease News

March 14 – March 20, 2023

MARKET

What Recent Bank Failures Mean for Real Estate

• The sudden collapse of Silicon Valley Bank sent shock waves through Wall Street and the credit markets, forcing property owners, investors and lenders to once again reassess and recalibrate their prospects in an uncertain economic environment.
• Significant regulatory reforms have occurred in the finance industry — including the Dodd-Frank Act — since the Great Recession. Therefore, it’s unlikely that the issues faced by banks today will manifest in the same manner as the subprime mortgage crisis of more than a decade ago.
• That said, global liquidity is tightening. Incidents at SVB, Signature Bank, and First Republic Bank illustrate a growing need for liquidity. At the household level, a falling savings rate and soaring consumer credit growth indicate that cash flow is becoming scarcer.

Fed, ECB and four other central banks take ‘coordinated action’ to ensure dollar liquidity

• The Bank of Canada, Bank of England, Bank of Japan, European Central Bank and Swiss National Bank joined the Fed in rolling out an enhanced liquidity swap line for U.S. dollars.
• The swap lines are a set of standing facilities created in 2013 to allow the six central banks to provide each other with enough of each participating nation’s currency to provide liquidity to participating countries’ commercial banks when necessary.

US banking system remains sound, Yellen assures Senate panel

• This week’s actions demonstrate our resolute commitment to ensure that depositors’ savings remain safe, Yellen said in her testimony on the 2024 budget to the Senate Finance Committee.
• Yellen was the first administration official to face lawmakers after regulators rushed to protect depositors’ funds at failed regional banks.
• Once Yellen’s testimony ended, 11 big banks agreed to deposit $30B with First Republic Bank (FRC).

INDUSTRIAL

Industrial Real Estate Market’s New Demand Driver Changing Space Requirements

• Companies looking to reduce exposure to supply chain uncertainties and global conflict risks are increasingly looking to move manufacturing operations out of East Asia and return them to the United States or as nearby as possible, experts say, trends known as reshoring and nearshoring.
• U.S. manufacturing growth outpaced the rest of the world toward the end of 2022, according to Atlantic Council GeoEconomics Center data reported by Axios.
• Reshoring isn’t the only phenomenon that has the potential to spur a new wave of industrial demand. A vast transportation network of ports, railroads and interstates also sets up the South, Southeast and Midwest to benefit from nearshoring — the process of moving manufacturing operations from farther away, mainly East Asia, to North America, most often Mexico.

Amazon Buys Silicon Valley Industrial Site

• Amazon may be slowing the growth of its industrial footprint across the country, but the e-commerce giant’s nearly $240 million purchase of a Silicon Valley industrial complex shows it is still willing to shell out for real estate where it thinks it will count the most.
• Amazon rapidly expanded its industrial real estate portfolio since the start of the pandemic and went on a hiring binge that increased its workforce, adding about 270,000 employees in the second half of 2021 alone. By the end of 2021, the e-tailer was leasing more than 370 million square feet of industrial space, according to CoStar data, roughly double the amount it was committed to in 2019.
• Excess industrial space in the retailer’s distribution network meant Amazon reported a $2 billion year-over-year increase in real estate-related expenses in the first quarter of 2022.

RETAIL

Single-Tenant Retail Availability Declines to New Low

• As demand for U.S. retail space continues to benefit from a combination of strong consumption and limited supply, the amount of available retail space has contracted to its lowest level on record.
• After rising to a five-year high of 3.3% during the depths of the pandemic, the availability rate for single-tenant retail properties has fallen to just 2.4% as of the end of 2022.
• As such, the threat from new supply should remain minimal for the foreseeable future, and barring a significant shock to consumer spending, single-tenant retail space availability looks set to remain tight.

CarMax plans expansion with new store and production facility in West Valley

• Richmond, Virginia-based used-car dealer CarMax Inc. is expanding in the Phoenix metro with a new location in the West Valley.
• CarMax, one of the largest used-car retailers in the U.S., purchased the property from Nevada-based Dermody Properties on March 10, according to real estate database Vizzda and county records. 
• The site is part of a larger and fast-growing industrial center in El Mirage that’s master-planned by Dermody and will include both speculative and build-to-suit facilities and called LogistiCenter at Copperwing.