0 CRES Stats Report | Week Ending April 2nd

CRES Stats Report | Week Ending April 2nd

  • Keeping with recent history, 34 spaces hit the market as available in the subject area in the last 7 days, equating to ~207,000 SF, which is substantially lower than recent weekly additions;
  • 22 spaces (over 1,000 SF) came off the market equating to ~136,000 SF, consistent with recent history;
  • Amazingly, we crested to a new high of  17.2MM SF of Availability in the downtown during the last 7 days.

0 CRES Stats Report | Week Ending March 26th

CRES Stats Report | Week Ending March 26th

  • A paltry 17 spaces hit the market as available in the subject area in the last 7 days, equating to ~90,000 SF, which is substantially lower than recent weekly additions;
  • 15 spaces (over 1,000 SF) came off the market equating to ~111,000 SF, consistent with recent history;
  • In Q2 of 2020 the Availability Rate was 9.6%.  Today it is nearing 2x higher at 15.3%;
  • Availability in the downtown during the last 7 days stayed just under 17MM SF at 16,700,000 SF.

0 The Transparency of Investing in Brick and Mortar Real Estate

The private commercial real estate investment market will continue to grow.

By Jason S. Weissman | Wealth Management | March 22, 2021

One of the core truths in value investing is the need to understand the risks involved, and that sometimes the risks are far greater than the rewards. Today, however, investors in the public equity markets are blindly making bets on vast future growth without realizing that the rewards must meet the risks. Are those future profits really going to materialize?

As an example, there is much talk today about Tesla, a company characterized by Seth Klarman—one of the world’s foremost value investors and the founder of hedge fund Baupost Group—as “barely profitable,” yet its shares had soared “seemingly beyond all reason.” As reported by the Financial Times, in a private letter to investors in his fund, Klarman placed considerable blame on current central bank policies and government stimulus that convinced investors that risk “has simply vanished”, and that this has left the public equities market unable to fulfil its role as a price discovery mechanism.

Compare this irrational exuberance with the rigorous, and increasingly data-based, underwriting standards for investing in the hard commercial real estate asset class. One of the greatest attractions of investing in brick and mortar real estate is its transparency.

Fact-based underwriting standards and metrics applied to investing in brick and mortar real estate have been in place for decades. Lenders study market vacancy rates and new product coming to market. What are the historical rents, historical operating expenses, NOI? What will the mortgage be? These questions are part of authentic underwriting and how to do a deal.

In contrast, where is the data to show why Tesla should be trading at a 1,200 price-to-earnings ratio? Perhaps this has something to do with space travel? I am no expert in public equities, but no one seems to have an explanation why, in the middle of a pandemic, the S&P 500 is at an all-time high. Furthermore and regarding publicly traded tech companies, how can anyone predict cash flow levels 5 to 10 years in the future? Some of the safest brick and mortar real estate investments can be bought in the 4% cap rate range. This is equivalent to about a 20 price-to-earnings ratio. While the growth potential may not be similar to Tesla, there isn’t nearly as much downside.

With that, when an investor acquires a multifamily property, that said investor will proceed well-equipped with a wealth of data to evaluate downside and risk. I also believe that this is why there is no bubble in commercial real estate. The market has specific guidelines to protect against bubbles. Lenders are no longer offering financing at 100% loan-to-value. Today, it is 65 percent to 70 percent LTV. Banks are looking more closely at the sponsors and how much liquidity they have. They are looking at rent comparables and competing inventories.

With hard assets, the investor has more control. The investor sees real numbers and analyses to make evaluations. Even better, it has gotten easier to purchase and sell real estate over the past 20 to 30 years, because there is more transparency and efficiencies in the real estate markets. When hard assets trade, they generate valuable data. Risk meets reward.

Today, cap rates are depressed, and asset values of commercial real estate are inflated due to the cheap cost of capital. These facts notwithstanding, many real estate asset classes are underwritten with very stringent guidelines. Borrowers are putting a lot of capital into deals and the market is efficiently performing. I believe that hard real estate assets are priced fully, but not overpriced.

Many of my colleagues and I are predicting that approximately $200 billion of investment capital will come off the sidelines this year as investors re-enter the market after waiting out the uncertainty of 2020. Accordingly, we expect commercial real estate investment to rise by 50 percent in 2021’s second half.

To be sure, there are areas of risk. How will people travel, and how will people work in the future? With that said and when you look at the actual deals, the data reveals opportunities that are under-writable. Housing, triple-net retail, industrial and logistics are true to form underwriting situations. These are assets that can be underwritten for investors and offer more predictability. If you are looking for a rational market, look no further than the private commercial real estate market.

There are ways to invest in commercial real estate today that do not require the investor to make major bets on how people will work, travel, and live in the future. This includes hard assets that have undergone stress tests over the past eight months.

For example, an investor does not have to make a major bet on New York City’s economic recovery to buy into local workforce housing in Brooklyn or Queens. A 200-unit multifamily property will generate data to enable the investor to underwrite a cash flow. This investor is not seeking an opportunity to back a luxury resort development in Hawaii. In other words, you will not be required to predict the future to do well. Available data makes the situation transparent.

In short, there is no bubble in the private, hard-asset commercial real estate market. Stringent and rigorous underwriting guidelines, based on data, removes the need to predict the future. Properties are being priced efficiently. You do not need to have faith, but you do need to underwrite according to the wealth of data available to you. Because of the transparency that data provides, money is flowing into brick and mortar.

Jason S. Weissman is founder and senior partner with Boston Realty Advisors.

0 CRES Stats Report | Week Ending March 19, 2021

CRES Stats Report | Week Ending March 19, 2021

 

  • Keeping with the trend 30 spaces hit the market as available in the subject area in the last 7 days, equating to ~232,000 SF, which is on the higher end of the curve of recent weekly additions;
  • 13 spaces (over 1,000 SF) came off the market equating to ~116,000 SF, consistent with recent history;
  • Checking in on Harvard SQ/Mid-Cambridge, a 2.5MM SF market, there is 280ksf direct available and 350ksf of sublease space available;
  • Availability stayed in downtown stayed just under 17MM SF at 16,700,000 SF.

0 Betting on Urban Multifamily Real Estate

With the new focus on suburbia, what will come of the urban multifamily investment market? Jason Weissman of Boston Realty Advisors explains.

By Jason S. Weissman | Multifamily-Housing News | March 19, 2021

A multitude of investors and investment groups have been routinely upping their ante to acquire hard real estate assets year-over-year. This diverse group includes a tapestry of family offices, hedge funds, institutional investors, high net worth individuals, wealth advisory firms and foreign equity, all of whom share a common goal—a need to put their money to work.

According to EY’s 2020 Global Alternative Fund Survey and following a multiyear trend, allocations to real estate increased to 26 percent from 23 percent the prior year.

The real estate industry in the U.S. is estimated to be worth more than $18 trillion and represents 13 percent of the GDP. Real estate investment opportunities include a large swath of assets to select from. One of the largest and most active segments of the industry is multifamily real estate in urban markets—specifically gateway cities throughout the U.S.

Historically, the urban multifamily sector has been one of the most secure and steady real estate investments, even during the Great Recession. For nearly 50 years, the global trend toward urbanization has been in vogue. People moved to cities in droves. The vital investment ingredients of high occupancy rates and consistent cash flow with little distress has made investing in urban multifamily a steady bet.

For the first time in decades, this sure bet on urban multifamily is up for debate. Since the start of the pandemic, investor appetite has augmented. As a result of most employees working from home, the appeal for urban multifamily has transitioned to suburban multifamily and suburban single-family rentals. Consequently, publicly traded single-family homebuilders, such as Toll Brothers and Pulte, are trading at all-time highs. Public REITs, who have exposure to urban multifamily, have been some of the weakest performers in the last 12 months.

Amongst many other byproducts of this pandemic, COVID-19 generated economic volatility and market unpredictability. With the new focus on suburbia, what is to come of the urban multifamily investment market?

Optimistic investors acquiring real estate today appreciate the required long-term investment horizon to maximize net operating income. Conservative investors are taking the long view. The good news is mutually shared, as optimists and conservatives alike are all betting on a recovery—with slightly different timelines.

Cautious and hesitant buyers have realigned their conventional underwriting criteria to “risk-off,” driven by their prediction of a rebound within the next four to five years. In the same supply-constrained gateway cities, optimistic, or “risk-on” investors are betting that gateway cities will rebound within the next two years.

History teaches us that cities always come back. Even when at their weakest, cities ultimately prove resilient and become enormous profit centers.

According to a Moody’s Analytics report, issued in the height of the pandemic, U.S. cities with collegiate centers and fast-growing tech hubs will be best positioned for a swift recovery.

In Boston, for example, the life science and technology sectors are tremendous assets for recovery. Recent commitments from companies such as Amazon and LogMeIn, as well as Sanofi and Moderna, all coupled with an abundance of intellectual capital, position Boston as one of the fastest cities to rebound in a post-COVID era.

The life science industry in Boston is expanding from traditional research and development to include biomanufacturing. This market increase has attracted an unprecedented investment for new life science development. In turn, this commercial growth will generate continued demand for multifamily housing throughout the city.

Further elevating support for betting on multifamily today is a recent report by NAREIT that indicated multifamily remained highly resilient in 2020, stating that rent deferrals and forbearances in multifamily properties were a small fraction compared to office and retail properties.

While the valuation of other asset types has tilted and other sectors have hit the investment pause button, cities such as Atlanta, Austin and Boston have urban multifamily properties trading at pre-COVID rates, with no pricing discounts.

Despite the realities of today, rent collection declines and falling occupancy rates—the urban multifamily market is alive and well. To validate this point, Freddie Mac, the nation’s multifamily housing finance leader, set a record in 2020 with $82.5 billion in multifamily loan purchases; most of those deals transacted in the latter half of the year and within gateway cities.

When we realize a full economic recovery, investors that are laser focused on urban multifamily today will be three steps ahead of the more conservative buyers still waiting on the sidelines. The collective investment community should play their cards today. Those that don’t will be kicking themselves in five years for holding their chips.


Jason S. Weissman was born in Boston and graduated from Curry College in three years and received an MBA from Babson College. Weissman founded Boston Realty Advisors in 2001. He launched the firm with multiple service lines under one roof—created leadership roles for multifamily, office, retail, hospitality and user housing—and became the largest, independent real estate services firm in New England. Weissman manages the investment sales and capital markets platform, with an owner-aligned philosophy.  He is also the founder of The Broadway Co., a real estate investment company with more than 60 investment properties in North America and is an active member of numerous organizations including the International Council of Shopping Centers.

 

0 CRES STATS REPORT | WEEK ENDING MARCH 12th

CRES STATS REPORT | WEEK ENDING MARCH 12th

  • 37 spaces hit the market as available in the subject area in the last 7 days, equating to ~255,000 SF, which is on the higher end of the curve of recent weekly additions;
  • A paltry 16 spaces (over 1,000 SF) came off the market equating to ~113,000 SF (noting the characteristic churn of sublease spaces rotating to direct);
  • UNFORTUNATELY, there was a large spike in availability and the current rate is  now unbelievably knocking on the door of 17,000,000 SF (equating to 16.7MM SF);
  • I’ll hopefully have better news next Thursday, stay tuned.

0 CRES Stats Report | Week Ending January 5th

CRES Stats Report | Week Ending January 5th

  • 34 spaces hit the market as available in the subject area in the last 14 days, equating to ~280,000 SF, which is very typical over the past few months;
  • 20 spaces (over 1,000 SF) came off the market equating to ~125,000 SF;
  • The current availability rate is the highest ever at ~16.5MM SF, or about 14% total availability.  About 4MM SF of that number is sublet availability.

0 CRES Stats Report | Week Ending January 29th

CRES Stats | Week Ending 1.29.21 : (sublease & direct – in all cases temp space excluded) from Mass Ave to the Seaport, South End to North Station.

  • 62 spaces hit the market as available in the subject area in the last 14 days, equating to ~235,000 SF;
  • 63 spaces (over 1,000 SF) came off the market equating to ~144,000 SF;
  • Much of the space was new sublets coming on and many sublets converting to direct space;
  • What is the market that we’re tracking noted above?  It’s about 62MM square feet;
  • The current availability rate is ~15.8MM SF, or about 14.3% total availability.

0 CRES Stats Report | Week Ending January 15

CRES Stats Report | Week Ending January 15

  • 48 spaces hit the market as available in the subject area in the last 7 days, equating to ~950,000 SF which is mostly made up of 10 World Trade Center Avenue (new product) and 125 Necco (new product);
  • 17 spaces (over 1,000 SF) came off the market equating to ~95,000 SF;
  • The current availability rate in Boston kicking off ’21 is just a smidge under 16,000,000 square feet.