Singapore Property Values Expected to Double by 2030

According to CNBC (citing analysis from Morgan Stanley), home prices in Singapore will double by 2030 (a 5-6 percent increase per year). The city-state’s economy is expected to grow by three percent in the medium term (2016-2030). Singapore’s GDP gained 2.9 percent YOY in Q4-2016 and grew by 2.5 percent YOY in the first quarter of 2017. Last year, residential property made up around 45 percent of total household gross assets with about 91 percent of Singapore’s residents owning their homes.

Urban Alley Revitalization

The increasing scarcity of affordable urban space and the demand for intimate, relaxed urban settings has led to an urban alley revitalization trend across many major U.S. cities. DC’s Height Act of 1899 limiting building heights to 110 feet has made space efficiency gains in the city that much more important.

As of September 2016, the following DC Zoning Commission changes affecting alleys went into effect:

  • Alley dwellings will be permitted by-right in R-3, R-4 and R-5 zones in the city along 24-foot wide alleys, and on certain lots within 300 feet of a public street if the alley measures at least 15 feet wide;
  • Single-family alley dwellings will also be allowed in other cases with a BZA special exception, pending input from DC Water, District Department of Transportation (DDOT), Department of Public Works (DPW), the local Advisory Neighborhood Committee, or other interested parties wherever applicable;
  • Pre-existing alley lots must have a minimum square footage of 450 square feet in order for a dwelling to be built;
  • Alley dwellings will also be subject to setback requirements and a height limit of 20 feet in residential zones. The height limit for alley dwellings in commercial zones will be 30 feet;
  • In low-density residential zones (R-1 and R-2), alley dwellings will not be allowed;
  • Multi-family alley dwellings could potentially be permitted in commercial zones, although they will remain prohibited in residential zones;
  • Large alley lots can be split into more than one lot if square footage requirements are still met.

Source: UrbanTurf

Superstar Cities and Income Inequality

The top five MSAs in the U.S. where the average worker has the most left over after housing costs also happen to be the country’s premier tech hubs and superstar cities (where housing demand exceeds supply and supply growth is limited). In these markets, the most advantaged residents derive the majority of the gains, according to Richard Florida writing for the The Atlantic. In San Jose the average “creative class” worker has $80,503 left over after paying for housing, the average working class worker has $23,109 left over and the average service class worker has $14,372. The working class and service class workers’ post-housing incomes in these MSAs are not much different from the post-housing incomes for these classes of workers in the five MSAs with the overall least post-housing income.

Chart: Martin Prosperity Institute (via The Atlantic) – Data: U.S. Dept. of Labor, U.S. BLS, U.S. Census

Europe’s Most Active CRE Market

Germany has overtaken the U.K. as Europe’s most active commercial property market. In 2016, CRE transactions in Germany totaled €59 billion, according to Property Forum (citing data from Knight Frank). Berlin, fast emerging as Europe’s economic hub, accounted for €5.7 billion of the total volume. Sixty percent of the property deals in Germany involved domestic buyers.

CRE Construction in 2016

At close to $25 billion, New York State was first in the country in terms of 2016 commercial property construction expenditures. The industry supported 284,135 jobs in the Empire State, according to NAIOP data.

In the U.S. as a whole, the commercial development and construction industry added $861 billion to the nation’s GDP in 2016, according to The Dallas Morning News.

Chart: NAIOP

Retailer Distress

So far in 2017, ten retailers have filed for Chapter 11 bankruptcy protection, a figure higher than all such filings in 2016 and on pace to meet or exceed 2009 when 18 retailers opted for Chapter 11.

According to CNBC (citing data from AlixPartners), more than fifty percent of the filings this year come from retailers purchased by private equity firms in leveraged buyouts. The five-year average for such transactions is 31 percent.

The retailers that have filed for Chapter 11 bankruptcy protection so far this year include, Gordmans, BCBG Max Azria, Gander Mountain, HHGregg, General Wireless Operations (former RadioShack), Payless, Michigan Sporting Goods Distributors, Eastern Outfitters, Wet Seal and Limited Stores.

Boston Update – 04-2017

The median condo price in Boston reached $913,500 in Q3–2016, a 43 percent increase from the same period in 2015, according to Forbes (citing research from real estate marketing firm LINK). Boston is the third top choice of foreign real estate investors following New York and Los Angeles according to the Association of Foreign Investors in Real Estate.

Amazon Acquires Souq.com

Amazon has acquired Souq.com – the largest e-commerce platform in the Arab world. Founded 12 years ago by Ronaldo Mouchawar, the English-Arabic language platform garners over 24 million unique visits per month and delivers to many Persian Gulf states and to Egypt, according to Wikipedia. Although the sale price is undisclosed, it is estimated to be slightly below Dubai-based Emaar Malls offer of $800 million.

Depreciation Rate from an Investment Perspective

According to a 2014 MIT Center for Real Estate research paper analyzing depreciation from an investment perspective and based on 107,805 transaction price observations, the overall average depreciation rate for commercial and multi-family properties is 1.5 percent per year, ranging from 1.82%/year for new buildings to 1.12 percent per year for 50-year-old buildings. Multi-family properties depreciate slightly faster than other commercial properties, according to the study.

Depreciation (from an investment perspective) is the long-term decline in a property’s value due aging and obsolescence after netting out inflation and routine capital maintenance. It is exclusive of temporary market downturns.