EPISODE 8
In our latest Simon SumUp, Joshua discusses the appetite for CRE lending in 2019; net lease investing in the year to come; and Amazon's new grocery model.
THREE TAKEAWAYS
1) A healthy appetite for CRE lending
According to the Mortgage Bankers Association, commercial mortgage originations were up 3% in 2018 from 2017’s record $530 billion.
According to the MBA’s 2019 Commercial Real Estate Finance Outlook Survey, 74% of bankers anticipate activity will be the same, if not higher, this year.
This is because the fourth quarter of 2018 saw originations up 14% compared to the fourth quarter of 2017. So, there was significant momentum coming into 2019 and through the first quarter of the year.
Despite the fear that banks may face more headwinds in construction financing due to the late stage of the cycle and rising costs, there is still a healthy appetite for commercial real estate lending. We’re expecting a lot of equity targeting CRE and a steady transaction pipeline requiring financing in 2019.
2) Net lease investment in the year to come
Strong liquidity has, and continues to help bolster an active net lease investment market.
According to recent NREI research, nearly two-thirds of respondents rated the availability of both equity and debt as the same or better than it was 12 months ago.
Additionally, according to Real Capital Analytics, single-tenant property sales rose 11% in 2018 to over $65 billion.
Many investors are transitioning to more passive income and more transparency.
With 84% of people expecting rates to remain the same and with limited movement on the 10-year,...cap rates should remain stable and strong demand for net lease will continue.
3) Amazon’s new grocery model
Amazon recently announced plans to open dozens of grocery stores in several major cities across the US by early 2020.
They’re also considering opening outlets in San Francisco, Seattle, Chicago, Washington, DC, and Philadelphia.
All of these stores will take on a new brand new then Whole Foods, the grocer which Amazon acquired in 2017. The goal of these stores will likely be to target a different shopper profile than Whole Foods. The concept is likely to have different, more affordable food offerings.
The reason for such plans is because Amazon sees grocery retail as one of the most stable industry segments and is hoping to cash in. The company captured just 3% of the roughly $830 billion grocery market last year - leaving a large, untapped opportunity.
The move has also spurred other retailers to action. Walmart recently announced plans to offer grocery pickup service at 3,100 stores by January 2020, and offer grocery deliveries from about 800 more stores by the end of the year.
