News

Landmark Links October 5th – Shaken to the Core

 

Must Read: UBS Asset Management is out with a fascinating white paper about how core real estate investment will have to change substantially in today’s disruptive business environment.  Here’s a snapshot:

“Consequently real estate assets are likely to become more asset management intensive and core income streams may face increased volatility. On the upside, successful active management may identify new income streams by providing additional services to the tenant which increases the asset’s income stream and thus the property’s valuation.”

And:

“Traditional underwriting standards for core strategies usually calculated with modest CapEx only. Tenant’s needs are getting more flexible and diverse real estate assets may depreciate faster. Therefore core strategies are likely to become more CapEx intensive. Location is likely to become even more crucial. Building or managing to core will become an integral part of core real estate strategies. The traditional buy-and-hold-and-collect-the-rent-strategy is unlikely to be successful in the future. High transaction costs limit the ability of core strategies to rotate the portfolio actively. Therefore the future for core strategies is more likely to be buy-and-manage.”

Economy

Gravy Train: A new study from Merrill Lynch and Age Wave found that parents spend $500 billion annually on their ADULT CHILDREN while putting only $250 billion away for their own retirement.  Looks like helicopter parenting continues long after the “kids” are out of the house.

Cushioned: Most people assume that the current bull market in stocks will end in a crash.  However, the 35 year period after the end of the Great Depression suggests that may not be the case.

Only Part of the Story: Western countries are celebrating low joblessness, but much of the new work is precarious and part time.  It looks as though underemployment has become the new unemployment.

Commercial

This Will End in Tears: Crypto exchanges and investment funds are leasing a large amount of Class A office space in Hong Kong – home of the highest rents on earth – where even investment banks have been priced out.

Residential

Surprise, Surprise: Chinese developer Greenland Holding Group is struggling in the US due to underestimating how long it would take to build and sell apartments here.

Low-Balled: The once high-flying NYC real estate market is taking it on the chin as prospective buyers are routinely offering 20% – 25% below ask thanks to a glut of high end product.

Aim Low: Silicon Valley NIMBYs are protesting a plan to build affordable housing for teachers – who can no longer afford to live in the area – in San Jose because it “could affect property values by bringing renters into their Almaden Valley neighborhood.”

Profiles

Long Way Down: Its almost difficult to believe but GE was worth $600 billion in 2000.  It’s worth only $100 billion today – which is what you get when you try to become a financial services company in the run up to the housing bubble and an oil services company in the run up to the oil crash in 2015.  The amount of lost market cap is the equivalent to erasing all of Facebook.

Thinly Staffed: After the latest round of cuts, the IRS doesn’t have much of a budget left to go after tax cheats.

Dystopia is Here: A cafe near Brown University allows students to pay for coffee with their personal information – which is then sold to corporate sponsors – rather than cash.  In other words, its a brick and mortar version of Facebook.

Chart of the Day

Construction spending update from The Daily Shot:

Construction Spending in August was weaker than expected

Two trends developed this year:

• Growth in nonresidential spending now exceeds residential expenditures (for the first time in years).

Growth in public construction projects has overtaken private expenditures – also something we haven’t seen in years.

Here is the public spending growth on water supply infrastructure, for example. Expenditures on conservation, transportation, and highway/street projects also climbed sharply this year.

Source: The Daily Shot

WTF

Just A Little Further Left: 259 people have died as a direct result of trying to take the perfect selfie because Millennials.  Its a shame that they can’t all win Darwin Awards.

Displaced: Legal prostitutes are protesting sex doll brothels that are scheduled to open in the US.  And here you thought that truck drivers and warehouse workers were the employees most in danger of being replaced by robots.

Huh?  The new hot dating craze in Los Angeles is apparently getting your butthole steamed because sometimes this place is a self parody.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

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