| | | | | | | | | | True to his word, Donald Trump has rapidly taken fierce aim at sustainability initiatives built up by the previous administration. Beyond top-level moves like pulling the U.S. out of the Paris Agreement again, he has taken steps that would or could impact CRE. He has suspended government funding for electric vehicle charging stations. He has threatened to repeal the Inflation Reduction Act, which includes $9B in rebates and grants for residential buildings to do energy-efficiency retrofits. He also revoked the Federal Flood Risk Management Standard, which required construction on flood plains to meet certain building codes to receive federal funding. EV and battery factories that had been springing up around the U.S. with the help of government grants are in limbo. | | | | It’s clear the president isn’t done yet dismantling sustainability and resiliency-focused programs and policies. There is definitely some celebration in CRE about the possibility of less regulation. But many in the industry have been saying energy retrofits and the like just make business sense, and state rules and grant money are unaffected by the federal shift. So is this a sea change for CRE? Here’s our analysis: What Trump's Flurry Of Climate Actions Could Mean For Commercial Real Estate — Catie Dixon, Mark F. Bonner, Kayla Carmicheal and Jay Rickey Not getting The First Draft in your inbox? Click here to sign up. Got any feedback or want to send us a mailbag letter? Email first...@bisnow.com. CRE News Quiz Last week, RFR’s ground lease at the Chrysler Building in NYC was terminated after an intense legal battle over ownership, giving control of the building to Cooper Union. What year was the iconic art deco skyscraper built, and how long did it take? (Answer at the bottom.) On Our Radar Trump’s tariffs on Canada, Mexico and China will take effect at midnight. Are the EU and UK next? Trump said Sunday they will come “pretty soon.” Today, Trump has planned eleventh-hour calls with Canadian PM Justin Trudeau and Mexican President Claudia Sheinbaum — and indeed as we hit send on First Draft, there are reports that Mexico tariffs will be delayed by one month. For Trump, these tariffs are all about border security, the fentanyl crisis and economic fairness (“the United States has been ripped off”) — grounds that are largely refuted by the targeted countries. On the news, global and domestic markets reeled, gold surged, bitcoin dropped below $100K, and the U.S. dollar gained some muscle. Canada and Mexico have announced retaliatory tariffs targeting key U.S. exports from red states. CRE braces for higher costs, inflation risks from tariffs. Developers fear higher construction expenses could stall projects, with Goldman Sachs predicting a 0.5% GDP drop in the first 18 months. The tariffs could benefit U.S. industrial real estate through onshoring but may raise construction costs, impacting housing affordability. Key materials like steel, aluminum and glass, heavily sourced from China, will be affected, potentially causing supply chain delays and price spikes. Canada and Mexico are key suppliers of U.S. building materials. While some expect Trump to eventually negotiate softer terms, uncertainty looms, favoring larger firms with robust procurement strategies as smaller developers now face cost and sourcing challenges. U.S. construction spending rises 6.5% in 2024. The Census Bureau reported December construction spending at a seasonally adjusted annual rate of $2.19T, up 0.5% from November and 4.3% year-over-year. Total 2024 construction reached $2.15T, a 6.5% increase from 2023. Private construction grew 5.6% to $1.66T, driven by a 5.9% rise in residential projects. Residential led growth, while nonresidential sectors like manufacturing (up 20.4%) and public safety (up 31%) also saw significant gains. Rebuild or sell after LA fires? Multifamily owners face tough choices. Following the devastating LA fires, owners of roughly 400 damaged apartment properties must decide whether to rebuild or sell. Mom-and-pop owners may lean toward selling due to the high costs and complexities of reconstruction. Developers may swoop in, leveraging insurance payouts to fund new projects, though financing remains uncertain. Some lenders are offering favorable rates, anticipating demand amid a tight rental market with vacancies projected to drop below 4%. Rebuilding could reshape communities, replacing naturally affordable housing with higher-rent units, further straining affordability.
This Morning’s News | | | | Wikimedia Commons/Anthony Quintano | | | | | | | | DATA CENTERS — Big Tech Firms, Blackstone Tamp Down DeepSeek Fears (Bisnow): Execs at data center giants Meta and Microsoft, along with investor Blackstone, addressed DeepSeek’s AI model on quarterly earnings calls, stating the emergence of the company hasn’t interfered with their data center plans. Read more here.
MULTIFAMILY — Office-To-Resi Conversion Pipeline Hits Record 71,000 Units (Bisnow): The number of housing units in the office conversion pipeline has almost tripled from three years ago. Residential conversions make up 42% of the total 168,500 adaptive reuse construction pipeline. Notably, the number of units actually delivering each year is a fraction of what has been announced — just 4,000 of last year’s 55,000-unit pipeline completed last year. Read more here.
INDUSTRIAL — Big Deals Drive Property Prices Up (CoStar): Major transactions are boosting commercial property prices nationwide, with large-scale deals offsetting broader market sluggishness. Read more here.
| | | | | | | | Unsplash/Ahmer Kalam | | | | | | | | ESG — Climate Change Threatens $1.4T In Real Estate Value (Axios and WSJ): A peer-reviewed report reveals climate risks could erase up to $1.5T in property values in the U.S. Read more here and here.
M&A — Welltower Acquires NorthStar Healthcare For $900M, Launches Private Funds Unit (Welltower): A Welltower affiliate will acquire NorthStar Healthcare in a $900M deal. The company has also unveiled a private funds management arm. Read more here and here.
SELF-STORAGE — Real Estate Heavyweights Fight It Out For £1B Platform (Bisnow): Private equity firms, sovereign wealth funds and listed companies are eyeing the acquisition of a UK self-storage company, Access Self Storage, in what would be one of the region’s biggest real estate deals in the last five years. Read more here.
FINANCING — Global Hedge Funds Shed Holdings — Except Real Estate Stocks (U.S. News & World Report): Hedge funds are retreating from broad asset classes but maintaining strong bets on real estate equities, according to Goldman Sachs. Read more here.
PROPTECH — Lula Secures $28M To Advance Property Maintenance Tech (Lula): Property maintenance startup Lula has raised $28M in Series A funding led by PeakSpan Capital. Lula's platform processed over 100,000 work order requests last year from more than 125 property management customers. Read more here.
FINANCING — Adam Finkel On How His Firm Will 'Survive Through '25' (Bisnow): Tower Capital is bucking trends, moving into California as other investors move out, and shifting from multifamily and single-family rental to retail loans. Read more here.
FINANCING — U.S. DOT To Tie Funding Preferences To Birth And Marriage Rates (Construction Dive): A new Department of Transportation policy will give grant preferences to communities with higher local birth and marriage rates. Read more here.
| | | | | | | | Courtesy of Chick-fil-A | | | | | | | | RETAIL — Chick-fil-A Reinvents Drive-Through Efficiency (WSJ): Chick-fil-A has teams to study its parking-lot traffic patterns. Chick-fil-A recorded $21.6B in U.S. sales in 2023; in 2024, about 60% of its sales came at drive-thru windows. Read more here.
OFFICE — FS Investments Chooses Philadelphia For Global HQ (Brandywine): FS Investments will establish its new global headquarters in Schuylkill Yards in Philadelphia. It signed a 16-year lease for 117K SF. Read more here.
HOTELS — Mirae Mulls $650M Sale Of Hyatt Regency (Bloomberg): South Korea’s Mirae Asset is exploring the sale of Waikiki’s Hyatt Regency, with the prime beachfront asset expected to fetch around $650M. Read more here.
OFFICE — 'A Domino Effect': Why The Rash Of Recent Chicago Office Deals Could Mean More Activity On The Way (Bisnow): Chicago office activity is heating up, with deals closing in rapid succession over the past several weeks. Market observers told Bisnow private capital is driving sales. Buyers are being drawn by heavily discounted properties, a price discovery uptick and the convergence of buyer and seller expectations. Read more here.
HOTELS — Brookfield Sells PGA National Resort (CO): Brookfield has offloaded the PGA National Resort in Florida for approximately $425M. The 807-acre property has hosted a PGA event since 2007. Read more here.
LIFE SCIENCES — Diversified Healthcare Trust Sells MUSE Property (DHT): Diversified Healthcare Trust has sold its MUSE life sciences facility in San Diego for $159M. The property was 49% leased at the time of sale. Read more here.
OFFICE — New York’s Patchy RTO Trends Pose Challenges For Recovery (Bloomberg): There's a supply crunch at amenity-rich NYC buildings, but older buildings are unloved. Read more here. *** So You’ve Come For An Answer Less than two years. The site began being cleared on Oct. 15, 1928, and tenants began taking occupancy in April 1930. Skyscrapers used to come together quickly! Unlike the legal battle between RFR and Cooper Union. Cooper Union issued a lease termination in September on the grounds of a defaulted lease and $21M in unpaid rent. RFR sued to block the eviction, claiming property mismanagement. New York State Supreme Court Judge Jennifer Schecter ruled in favor of the private college, ordering RFR’s ejection from the 1.2M SF property. Do you think you have a harder CRE news question? Email us. Take your best shot and we may feature you and your question in this space. *** The First Draft is produced by Director of Newsletters Jay Rickey, Managing Editor Catie Dixon, Editor-in-Chief Mark F. Bonner and Deputy Newsletter Editor Kayla Carmicheal, with an assist from AI. We’d love your feedback! Email us at first...@bisnow.com. | | | | | | | | | | | | | | | | | | | | | |
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