New Zealand Turns Insular

In an effort to stanch the rising cost of housing and cool pressure on existing infrastructure, New Zealand’s new coalition government intends to cut immigration and ban non-resident foreign buyers from purchasing existing homes in the country. According to the BBC (citing data from Knight Frank) annual house price growth in the country of 4.6 million is just over 10 percent with prices in Wellington having increased by 18.1 percent in the year to June 2017 and in Auckland by 9.8 percent over the same period.

Amazon’s New Sales Category

Seattle-based Amazon reported $1.27 billion in net sales under a new “physical stores” category on its Q3-2017 quarterly report. This number includes sales at the company’s physical bookstores and Whole Foods Market, which Amazon acquired on August 28 for $13.7 billion. The tech giant reported net sales of $43.7 billion for the third quarter (a 34 percent increase year-on-year) with profits of $256 million, according to GeekWire. Amazon shares were trading at just over $1,100/share as of Friday’s market close.

Retail Cap Rates – Q3-2017

In Q3-2017, cap rates for retail properties decreased by 12 basis points to 6.11 percent – the lowest level for this sector since Q3-2016 when the rate was at 6.10 percent. The spread between asking and sold cap rates decreased by 14 basis points during Q3-2017 to 21 basis points with 1031 and private buyer market accounting for 70 percent of single-tenant retail transactions and 85 percent of the transactions priced below a 6-cap. During the same quarter, the 10-year treasury yield dipped to 2.06 before ending the quarter at 2.33, according to Commercial Property Executive.

Walmart Acquires Parcel

Walmart has acquired last-mile delivery service Parcel for an undisclosed sum reported to be under $10 million, according to Retail TouchPoints. The Brooklyn-based startup, which currently operates in NYC providing same-day delivery services for online retailers, is Walmart’s fifth e-commerce acquisition in the past year after Jet, Bonobos, ModCloth and Moosejaw. Parcel uses routing algorithms, a fleet of leased vehicles and its extensive database of building information to provide round-the-clock service with real-time updates to customers. Walmart shares are up 15.91 percent this year.

Trader Joe’s Expanding Further in DC

Specialty grocer Trader Joe’s is expanding further in DC. In addition to Foggy Bottom, 14th Street and Capitol Hill (which opened last Friday), the California-based retailer plans to open a fourth DC location at Union Market next year and recently announced its intention to take 15,000sf at the Glover Park mixed-use project located at 2101 Wisconsin NW, according to Bisnow. The Glover Park development includes 225 apartment units and 20,000sf of retail and sits on the site of the former Holiday Inn. The Georgetown Whole Foods market, which is located a few blocks north of this site, recently closed and is mired in litigation with its landlord.

The Glover House – Image: The JBG Companies

Positive Net Store Openings So Far in 2017

Among chain retailers and restaurants with greater than 50 locations, net openings so far in 2017 total 4,080, according to an IHL Group report. Of this number, 1,326 are in core retail segments and 2,754 are restaurants. Grocery chains, discount and convenience stores account for much of the growth while fashion retailers, department stores and retailers in various stages of bankruptcy make up much of the closures. Retail sales are up $121.5 billion through the first seven months of 2017 from the same period in 2016. Online retail represents 8.3 percent of the total retail market but 29 percent of the retail growth, according to the report.

Major store closings in 2017 – Graph: IHL Group

Major store openings in 2017 – Graph: IHL Group

DC Council Bill Targets Diplomatic Properties

The DC Council is considering a bill that would direct the city to prepare and make public every six months a list of dilapidated properties owned by foreign governments, according to The Washington Post. The bill aims to address citizen complaints about run-down properties in NW DC that hold diplomatic status. Such properties are considered foreign soil and are not subject to the zoning and building codes that govern real estate in the District. Diplomatic status also exempts properties from taxes including property taxes ($0.85/$100 in assessed value (residential) and up to $1.85/$100 in assessed value (commercial)) and vacant or blighted property tax rates of $5 and $10 per $100 of assessed value, respectively.

Commercial Construction Index – Q3-2017

The Q3–2017 commercial construction composite index score was 73, only slightly below the previous two quarters (76 in Q2 and 74 in Q1). The 0-100 index, based on a survey of contractors, looks at three leading indicators – backlog levels, new business opportunities and revenue expectations – to gauge confidence in the sector.

  • Backlog (77): Contractors are currently holing 9.5 months of backlog, on average versus the ideal backlog of 12 months;
  • New Business (54): Fifty-four percent of contractors report high confidence in new business over the next 12 months;
  • Revenues (67): Sixty-seven percent of contractors expect revenue to grow or remain stable in the next year.

Long & Foster Gets Bought and Buys

HomeServices of America, an affiliate of the Warren Buffett conglomerate Berkshire Hathaway acquired the Mid-Atlantic residential brokerage house The Long & Foster Companies on September 7 for an undisclosed amount, according to The Washington Post. The acquisition includes Long & Foster’s mortgage, settlement services, insurance and property management business lines. For now, the brand, leadership, and headquarters location will not be affected by the change in ownership. Five days after it was acquired, Long & Foster bough the three-office brokerage firm Evers & Co., also for an undisclosed amount. Long & Foster’s 2016 sales volume totaled $29 billion.

Demand for New Multifamily Developments Expected to Stay Strong Through 2030

From 2012 through 2016, developers completed an average of 225,000 new apartments per year, according to National Real Estate Investor (citing data from Multifamily Housing Council (NMHC) and the National Apartment Association (NAA)). To meet growing demand and compensate for the loss of older properties, 4.6 million new multifamily units must deliver to market between now and the end of 2030 (an average of an average 325,000 units/year). The western U.S., Texas, Florida and North Carolina are expected to have higher than average demand for additional housing units.