Net Lease News

B+E Weekly Newsletter

July 18 – July 24, 2023

MARKET

FED RATE HIKE AHEAD. WHAT’S IN IT FOR CRE? | Commercial Search

• Experts across commercial real estate widely predict another 25-basis-point increase in interest rates at the Federal Reserve Open Markets Committee’s next meeting on July 26, which would bring the funds rate up to 5.25 to 5.5 percent.
• The expected increase, following last month’s pause, is slated to take place as the economy continuously cools, with headline inflation slowing to 3.1 percent and core inflation dropping to 4.8, their respective lowest since June and September of 2022.
• Total loan closings nationwide have declined by 33 percent since the fourth quarter of 2022, equally attributable to inflation, as well as the repeatedly increased rates.
• For the deals that do end up closing, the lenders’ priorities remain assets in sectors with strong, reliable long-term cash flows, and these priorities do not show any sign of changing in the near future.

ECONOMISTS WONDER WHETHER THERE MIGHT BE A SOFT LANDING AFTER ALL | GlobeSt.com

• The Consumer Price Index report for June was exceedingly good on the surface compared to the past year. Seasonally adjusted inflation was 0.2% in June and 3.0% year over year.
• Also, consumer sentiment rose for the second straight month, soaring 13% above June and reaching its most favorable reading since September 2021.
• Historically, when average quarterly inflation rises above 5 percent, the probability of a recession over the next two years is above 60 percent, and when the unemployment rate drops below 4 percent, the probability of a recession over the next two years approaches 70 percent. Since 1955, there has never been a quarter with average inflation above 4 percent and unemployment below 5 percent that was not followed by a recession within the next two years.

THE BEAR MARKET IS DYING AFTER LESS THAN 20 MONTHS AS ALMOST $10 TRILLION FLOODS BACK INTO EQUITY VALUES | Fortune

• Fewer than 20 months after the war on inflation began, the bear market that engulfed the S&P 500 is a mere 260 points from being completely erased. Up 27% from its October trough, the S&P 500 is now about 5% away from reclaiming its all-time high of 4,796.56 reached in January 2022. 
• Almost $10 trillion has been restored to equity values in the past nine months as job growth, consumer spending and corporate earnings defied doomsayers.
• Whatever scary scenarios investors had in mind going into 2023, few have panned out so far. While multiple regional lenders did fail, the government rushed to ring-fence the fallout and now financial results from big banks are largely exceeding expectations.

RETAIL

CHIPOTLE TO BEGIN EXPANSIONS IN 800 SMALL-TOWN LOCATIONS | Bisnow

• This expansion is part of the company’s long-term goal of expanding from 6,000 to 7,000 locations.
• Before 2021, Chipotle’s expansion efforts were largely focused on busy suburban areas. But after monitoring the performance of dozens of Chipotle restaurants operating in smaller markets, execs made the decision about 18 months ago to expand its reach into towns and cities with smaller populations.
• Locations were chosen based on a few factors, according to Chief Financial Officer Jack Hartung. These are areas with 40,000 residents or fewer and over an hour away from major metros, so as to not detract business from other locations.

BABIES R US OPENS FIRST STORE SINCE 2018, PLANS NATIONAL EXPANSION IN BUY BUY BABY’S WAKE | Bisnow

• Babies R Us is opening in New Jersey’s beleaguered American Dream Mall with the baby goods retailer’s new owner setting sights on more stores across the country.
• WHP Global bought Toys R Us and Babies R Us out of bankruptcy, and after opening the 10K SF Babies R Us at the American Dream, they plan on going after the $1B in market share that’s estimated to be available with the demise of Buy Buy Baby.
• In terms of what they did with Toys R Us, they started with a flagship and opened up 452 Toys R Us stores inside Macy’s across the United States, planning on replicating the strategy for Babies R Us.

INDUSTRIAL

$800M PLAN EYED FOR FORD’S TENNESSEE EV SUPPLY PLANTS | Commercial Search

• Magna International, a global automotive supplier, is investing nearly $800 million to build the first two supplier facilities at Ford Motor Co.’s $5.6 billion BlueOval City mega campus in western Tennessee.
• The Canada-based company plans to build two facilities at Ford’s supplier park in Stanton, TN, and a third plant in Lawrenceburg, TN. The on-site supplier campus will provide Ford vertical integration for efficient production at BlueOval City, which is projected to produce 500,000 electric pickup trucks at full production.
• Production at all three plants is scheduled to begin in 2025. Combined, the Magna investment is set to create approximately 1,300 new jobs in Tennessee. The company expects to employ about 750 people at the battery enclosures facility and another 300 people at the seating plant. The state has attracted more than $14.8 billion in EV-related investments, resulting in nearly 11,000 new jobs since 2019.

BOEING PLANS $1.8 BILLION ST. LOUIS EXPANSION PROJECT, ADDING 500 JOBS | KSDK

• The Boeing Co. plans to expand its operations in north St. Louis County in an investment that would be larger than the new National Geospatial-Intelligence Agency headquarters under construction in north St. Louis.
• Dubbed Project Voyager and aimed at new aerospace programs, plans call for the construction of multiple buildings totaling one million square feet with a capital investment of $1.8 billion.
• The investment would consist of $1.3 billion of real property investment and $500 million of personal property investment.