Global Market Perspective – 2019

1. Real estate market momentum slowing

The world economy has moved into a synchronised slowdown and geopolitical issues still abound. This is now filtering through to real estate markets; however, fundamentals remain healthy with momentum only easing gradually.

2. In a low-yield environment real estate still offers value

Returns for private real estate have remained stable during 2019 while public real estate continues to outperform other major asset classes at the global level. Government bond yields have declined further throughout the year, and real estate continues to offer a premium to most other asset classes despite yields being at record lows in many markets. The volume of capital held by funds that is yet to be deployed is near all-time highs and investors, though cautious and selective, remain keen to access the sector.

Click to read more at www.us.jll.com.

Consumers Not Abandoning Physical Retailers This Holiday Season

Retailers should expect a happy holiday season this year, at least according to a new report from Morning Consult. And that holds true for physical retailers, too, as the same survey found that many consumers plan to do most of their shopping at brick-and-mortar stores this season. According to Morning Consult’s 2019 Holiday Shopping Trends study, consumers are expected to increase their holiday spending this year, providing a boost to retailers that rely so heavily on end-of-the-year sales. Morning Consult said that 70 percent of U.S. consumers plan on spending at least $100 during the upcoming Black Friday weekend. The survey found that 52 percent of respondents say they are likely to shop during Cyber Monday, while 45 percent say they will shop on Black Friday. And even though online shopping gets most of the press, the Morning Consult survey found that 77 percent of Millennials said they are likely to go to shopping centers to find gifts. According to the survey, younger U.S. consumers are just as likely as older ones to shop in physical stores. What are these consumers planning to buy? Morning Consult said that 73 percent of respondents planned to buy clothing as a gift this year. A total of 77 percent said they plan on shopping at Walmart while 74 percent said they’ll buy online at Amazon. Those are the top two retail destinations, according to the survey. Click to read more at www.rejournals.com.

JC Penney Surges After The Retailer Reports A Narrower-Than-Expected Loss, But It Still Sees A Steep Sales Decline

J.C. Penney reported a narrower-than-expected loss for its latest quarter, sending its shares higher Friday morning. Its stock, which closed Thursday at $1.10, surged more than 22% at one point during premarket trading. It was up nearly 11% shortly before the opening bell. Here’s how Penney did for the quarter ended Nov. 2 compared with what analysts were expecting, based on Refinitiv data: Earnings per share: a loss of 30 cents vs. a loss of 55 cents expected Revenue: $2.38 billion vs. $2.51 billion expected Adjusted same-store sales: down 6.6% vs. a drop of 7.7% expected “The past quarter was an exciting and energizing time at JCPenney as we made significant progress on our efforts to return JCPenney to sustainable, profitable growth,” CEO Jill Soltau said in a statement. Click to read more at www.cnbc.com.

November Economic Commentary: Pace of Expansion Slowing

The last week of October was filled with a number of significant economic reports as well as the Federal Reserve’s recent decision on the course of interest rates. Although the uncertainties related to the continuing Chinese trade tensions, Brexit, and a slowing global economy were frequently mentioned, the raw data suggests that the U.S. economy is still expanding, albeit at a reduced pace.
GDP Growth Slows
The initial reading of 3Q-19 real GDP showed the economy advancing at a 1.9% annualized growth rate, which is down from the 2.0% rate in 2Q-19. The year-over-year rate of growth slowed to 2.0%. Real GDP in the first half of 2019 advanced at a 2.6% annual rate, but indications are that the second half of 2019 will likely show growth closer to 1.8%. Real GDP in 3Q-19 was mainly supported by consumer spending, which is the largest part of the economy. Consumer spending grew at a 2.9% rate, down from the 4.6% rate in 2Q-19. Contributions from the remainder of the economy were essentially nil in 3Q-19. Consumer spending is moderating, and the personal savings rate is near the upper end of its range of the past five years—indications that consumers are becoming more cautious. With American business reluctant to ramp up capital investment due to trade policy uncertainty and weak global demand, consumer spending in the U.S. (accounting for 70% of GDP) is the primary support for continued economic growth. Click to read more at www.northmarq.com.

Capital Markets Favor Sease Securitization Over Debt Financing On Core Owned Real Estate Assets

Companies that own commercial real estate critical to core business operations have a compelling financing and liquidity vehicle which has been underutilized: the sale-leaseback. Most large corporations rely on mix of short-term and long-term senior debt, revolving credit lines and free cash flow to fund operations. Much of the debt in the corporate financial ladder is subject to a balloon payment or refinancing at a specific date down the road. Sale-leaseback transactions, long used by private equity sponsors, is now growing in popularity among publicly traded corporations, as evidenced by the 30.5 percent year-over-year increase in single-tenant office and industrial transactions in the previous twelve months. Much of this growth can be attributed to corporations seeking the advantages created by recent fundamental changes to interest rates and spreads in the capital markets and the resulting increase in real estate values. In April 2019, ten-year U.S. Treasury interest rates fell below 30-day and 90-day LIBOR. Prior to this, there had not been an inverse relationship between long-term U.S. Treasuries and short-term LIBOR rates in more than 12 years. Since April, Treasury yields have continued on a downward trajectory while spreads also narrowed. At the same time, short-term LIBOR yields increased and their spreads widened, negatively impacting many U.S. corporations, as its estimated that U.S. corporations have over $200 trillion dollars in LIBOR-based exposure. Click to read more at www.rejournals.com.

International Homebuyer Activity Adds $7.8 Billion To Texas Economy From 2018-2019

AUSTIN, Texas- International homebuyer activity added $7.8 billion to the Texas economy from April 2018 to March 2019, according to the Texas International Homebuyers Report released this week by Texas Realtors. Texas ranked third in the nation for homes sold to international buyers, behind Florida and California. Texas accounted for 10% of all homes purchased by international homebuyers in the United States, with 18,310 home sales out of 183,100 nationwide. The U.S. saw a 31% decrease in the number of foreign buyer purchases compared to the last reporting period. Texas was particularly popular with buyers from Mexico and India. Of all homebuyers from Mexico, 28% purchased a home in Texas. The next closest state, California, had 10% of the total homebuyers from Mexico. Among buyers from India, 13% chose Texas—just behind first-place Florida, with 14%. Click to read more at www.smcorridornews.com.