Ben Black

The value of distressed assets in the #CRE marketplace continued to grow in the U.S. into Q3'24. Still, the ramp up is not as rapid as that seen following the GFC as there are different forces at play in the current market. Read more about the source of distress and a chart on comparisons to the GFC by my colleague Alexis Maltin here: http://ms.spr.ly/6049WR4GN MSCI Real Assets

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Colliers' May 2024 Manhattan Office Market stats featured in a recent Bisnow article. Although Manhattan recorded nearly 43M SF of negative absorption since March 2020, less than 10.0% of this negative absorption occurred within the last two years. As a result, the supply increase has moderated and even contracted in certain corridors. #nycofficemarket #nycleasing #realestate #nyceconomy https://lnkd.in/ekB7wr9P

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REITs Post Third Straight Month of Positive Returns in July, Outperform Broader Markets The FTSE Nareit All Equity REITs Index returned its strongest monthly performance of the year in July, posting a total return of 7.2% and outperforming broader markets. The Dow Jones U.S. Total Stock Market and Russell 1000 rose 1.8% and 1.5%, respectively. While it remains unclear when the Federal Reserve will begin to cut interest rates, most investors are beginning to expect a cut in September, as inflationary measures continue to approach the central bank’s target range. The yield on the 10-Year Treasury declined 32 basis points in July to end the month at 4.05%. The dividend yield on the FTSE Nareit All Equity REITs index was 3.86% and the FTSE Nareit Mortgage REITs Index yielded 11.97%, compared to 1.27% for the S&P 500. https://lnkd.in/gJ6KaeTA

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Listed REITs returned +2.3% last week, outperforming the S&P by 54bp and the NASDAQ by 50bp. Real estate was the 4th best of the 11 S&P sectors. Every subsector was positive as data centers (+4.9%), lodging (+4.7%) and office (+3.7%) led while single family rental (+0.2%), malls (+0.7%) and manufactured housing (+1.0%) were relative laggards. Year-to-date returns now stand at +12.1% with valuations only -2.7% below their 2024 highs. Here's your pretty picture.

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Let's talk about compensation structures in CRE. They can be tricky to get right, but understanding which bonus model works best for your team is key. Here are 4 common structures and when they work best. 1. Discretionary Bonus This is the go-to structure at most large CRE firms. You set a target bonus range, but the actual payout depends on both personal and company performance. - Usually ranges from 20% - 100%, depending on the role. - Acquisition roles often get 50-100%, while support roles see 20-30%. - Sets clear expectations but also gives flexibility during tough times. I like this model because it balances expectations with financial stability. 2. Target Bonus + Multiplier on Performance This one’s popular in asset management. You set a target bonus, and then adjust it with a multiplier based on hitting certain metrics (like NOI vs. Budget). For example: - 90% of target if NOI is within 90% of budget. - 100% of target if NOI is within 95%. - 110% of target if NOI exceeds budget. Great for asset management, if the KPIs are crystal clear. Not ideal for every role, though. 3. Bonus for Large Capital Events You’ll often see this in smaller firms, especially for acquisitions or capital markets roles. - Bonus is tied to specific events: deal closings, fundraises, etc. - Typically adds up to bonuses equal to 100% of base salary. - Useful for firms with cash constraints—bonuses happen when cash is actually available. This structure grows with your team, but you’ve got to be careful with compliance, especially in fundraising. 4. Percentage of Promote This one’s more common for execs in smaller firms. Often, promote participation vests over time or is tied to continued employment. - Usually 1-3% of promote per exec. - Rule of thumb: No more than 10% of promote should go to the team. - Great for young companies without much cash, but tough to scale once you’re past 20 employees. This model can also get emotionally charged because the stakes are high, handle with care. At the end of the day, compensation models in commercial real estate are about aligning incentives with company goals and keeping your team happy. Knowing when to use each model can make all the difference in retaining talent and scaling effectively. Which of these models have worked best for your team? I’d love to hear your thoughts!

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Interesting article in PERE today.   At the recent PERE Network America Forum, private real estate executives are expressed renewed optimism about the retail sector, and highlighted opportunities in retail, especially in grocery-anchored and standalone retail properties, as more favorable investments compared to traditional malls.   This is a trend that we have been ahead of for many years at DLC. Across, three white papers since 2020, we’ve shouted this from the mountaintop. In the last 12 months alone we have grown with five new partners and launched a major pipeline of transactions. All of our new partners, including Temerity and Cohen and Steers have done multiple transactions this year and are actively looking to do more as we continue to play offense.   We’re excited about this shift in mindset – and look forward to continuing our record growth.   Let’s do some deals!   Read the full article here. Subscription needed: https://bit.ly/4hWZ5wG   #CRE #RetailRealEstate

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As the industrial market slows down it isn't surprising to see Prologis forecast less demand as vacancy rates begin climbing nationally. The industrial market saw unprecedented rent growth since the start of the pandemic but that was an unusual set of circumstances unlikely to be completed. Overall, the industrial market is healthy and not overbuilt in most markets. Here in South Florida we have a wave of new product delivering over the next few quarters which will push the average vacancy rate a little higher and even though deal velocity has slowed, the long term demand for industrial space is more than likely. #JLLindustrial #warehousing #logisticsproperties

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In New York, we’re seeing incredible rental growth in residential rents, a drop in sublet space for offices, a resurgence of retail, and increased developer interest as new tax incentives have been announced. Let’s hope that soon, when asked about the market, we can say that we have turned the corner and are on our way back. Read my latest article for Forbes: The Psychology of the Real Estate Market: https://lnkd.in/et4Vt_4Y #realestate #realestatemarket

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Some Investors Say CRE Could Be Close To Bottom: 1Q 2024 ValTrends Report   Adversity continues to buffet commercial real estate (CRE), including high interest rates, constrained capital availability, conservative underwriting standards, low deal volume and negative returns. But some investors believe CRE is close to the bottom, according to the latest ValTrends report, “In the Crosscurrents,” SitusAMC’s quarterly analysis of important trends in the economy, CRE sectors, capital markets and the investment environment. Download free, 28-page report for 1Q 2024 now. https://lnkd.in/gQCr-bsn

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"At 2.75M SF, Manhattan’s leasing demand in April 2024 grew more than 50.0% since the prior month, nearly doubled since April 2023 and surpassed the five-year rolling monthly average. Additionally, at 9.08M SF, Manhattan’s year-to-date 2024 leasing activity was ahead of the 8.85M SF year-to-date volume during the same period in 2023." https://lnkd.in/ejXWvDyf

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Everyone is talking about the Fed…speculating about when will Powell cut rates…by how much…etc…etc… I am not an economist, but I do love dissecting data and trends and it’s pretty fascinating how inversely correlated consumer prices and unemployment rates have been over the very long term. Historical trends suggest that the fed has generally achieved its mandate to balance maximum employment and stable prices. Taking a long term view, it seems like the current spread between unemployment (red line) and CPI trend (blue line) does not warrant drastic cuts in the fed funds rate (green line). What am I missing?

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Did you know that a WHOPPING 45.3% of Equity Lifestyle Properties' Property Operating Revenue came from properties in Florida in 2023? For industry analysis & deep dives into portfolios & performance of operators like ELS, subscribe to my newsletter at: ohweekly.substack.com

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In the first half of 2024, the STNL retail market showed resilience despite economic pressures, with stable retail fundamentals and high occupancy rates. Discover more investment insights and trends in this STNL Retail Market Performance Report: https://ow.ly/hahK50TfccE

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Appraisers in the U.S. need better tools that allow them to use more judgement in valuing assets. My colleague Willem Vlaming has been developing work showing that in parts of the world with low market liquidity and few comparable sales, that appraisal teams have been better able to capture the decline in asset values. http://ms.spr.ly/6040Yw5ts MSCI Real Assets #CRE

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Check out the Colliers April 2024 Comps n’ Coffee, where Sheena Gohil and I discuss the increase in Manhattan's leasing volume along with a few key examples of flight-to-quality. More information can be found in the latest Manhattan Office Market report here: https://lnkd.in/eHD7MQqn #realestate #economics #research #Compsncoffee

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The attached chart shows alignment among Chatham, Pensford, econforecasting.com, and CME Group's SOFRWatch on the future direction of one month term SOFR over the next 24 months. This is the predominent index for bridge and construction debt. These projections from preeminent and authoritative sources support our view that value-add and construction lending are poised for a swift resurgence in 2025 and 2026. #SOFR #Finance #Economics

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What can Brown do for you? Sorry, I couldn’t resist, but if you are in retail or real estate, the answer is A LOT. I’m a 25+ year #cre #research #analyst and #commercialeealestate #economist that has specialized in #retailreakestate for the better part of my career. After a long journey in corporate real estate, I reunited with early friends and mentors at @gallellirealestate where I have been able to rediscover my entrepreneurial roots and launch the most comprehensive retail and reference guide to chains ever created. Something I have long dreamed of sharing with the market . That dream is #thebrownbook If there was ever anything that built my reputation in retail research it was knowing that knowledge of tenant plans and financials and their importance to gauging #shoppingcenter and retail health. As well as informing my team. Hockey great Wayne Gretzky once explained his success, “I go where the puck is going, not where it’s been.” That’s the basis of @TheBrownBook. A tool that helps you go where the puck is going to be and not where it was, in the fastest moving industry of all—retail. Now I am able to share with you all the culmination of my life’s work. All of my data gathering methods, connections, knowledge and endlessly hard work inform the data in #thebrownbook, the ultimate reference guide to retail tenants. An indispensable tool for #landlords, #developers, #investors, #tenants and #retailers (to know what their competition is up to), #facilitesmanagers, #appraisers, #media, anyone that needs solid #businessdevelopment tools that wants to know which #chains are growing, shrinking, new to market (you might not even know), or emerging. And who to call. Please check out samples of what The Brown Book contains. The Brown Book is not a book. It’s actionable knowledge for #businessdevelopment. https://lnkd.in/gTN-9qWT

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