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From what the banks telling me, multifamily and industrial are the two best performing asset class. The weakest one is office buildings at the moment. Other sectors are in between. Just my 2 cents. Take it for what it’s worth.
Eman says
From what the banks telling me, multifamily and industrial are the two best performing asset class. The weakest one is office buildings at the moment. Other sectors are in between. Just my 2 cents. Take it for what it’s worth.
I'm seeing a lot of multifamily (apartments and townhomes) construction in the Florida panhandle and they don't have trouble filling up.
As far as conditions with office buildings, is part of that due to work from home and offices cancelling leases such as only needing 3 floors of a building instead of 7 floors ?
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They could also employ mixed use high rises : https://architizer.com/projects/mixed-use-high-rise/
Commercial real estate could be converted to residential if there is a future glut due to various mega-trends like work from home, etc. Not as much office space is needed because of these mega-trends. This is one way to recover from a future financial disaster with commercial real estate.
They could also employ mixed use high rises : https://architizer.com/projects/mixed-use-high-rise/
I was looking at the Coast Guard headquarters building next to Fort McNair. It was converted to condos or apartments.
That entire area by the Washington Navy Yard and Washington Nationals stadium has changed or "gentrified" :-/
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As you have witnessed, the multifamily space is holding up well.
You’re absolutely correct. There are a few industrial buildings in downtown San Jose that got converted to condos successfully. I don’t know all the details and the cost of getting them converted as it’s not my area of strength. Here’s a link to one of the condos that got converted.
Eman says
As you have witnessed, the multifamily space is holding up well.
Multi-Tenant Apartment Building Sales Drop 74%, The Most Since 2008
Thanks to higher interest rates, turmoil at regional banks, and slowing rent growth, sales of apartment buildings are falling at their fastest rate since the subprime-mortgage crisis, the Wall Street Journal reports.
In the first quarter of this year, investors purchased approximately $14 billion of apartment buildings - a decline in sales of 74% from the same quarter last year, according to preliminary data from CoStar Group. The drop could be the largest annual sales decline for any quarter going back to a 77% drop in Q1 2009.
The $14 billion in first-quarter sales was the lowest amount for any quarter since 2012, with the exception of the second quarter of 2020 when pandemic lockdowns effectively froze the market.
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This is being taken out of context. Holding up well = lower chance of default when the loans mature or become adjustable. We’re talking about loans on the banks’ balance sheets, not sales.
The combination of factors noted above mean that the math for buying an apartment building doesn't pencil out in many cases - as the cost to refinance purchases has jumped along with interest rates. In some major metro areas, rents are also flat or declining, after record increases.
The remaining balance of many floating-rate loans will come due this year, and borrowers whose buildings aren’t bringing in enough cash every month might have to sell their buildings to pay off their debts. -WSJ
According to Trevor Koskovich, president of multifamily at the Northmarq brokerage firm, "We're in the very early stages" of floating-rate loans coming due this year, and various things hitting various fans.
https://www.youtube.com/watch?v=Ywk0MVL4gmA (Not on Rumble).