Limon Net Lease Group

research

Eviction Moratorium Report | August 2021

by

Eviction Pressures Abating as Economy, Labor Market Continue to Improve

  • Rising infections prompt moratorium extension. On Aug. 3 the Centers for Disease Control and Prevention enacted a new order halting residential evictions in counties with substantial or high levels of COVID-19 community transmission.
  • Federal aid and job growth lower eviction pressure. Contrary to initial expectations, rent collections have held up fairly well during the health crisis.
  • Multifamily sector performing well. Rental demand has already recovered substantially from last year, with a record number of apartments absorbed in the second quarter.

Additional Factors:

  • Court backlog may provide time for aid to arrive. Congress has allocated close to $47 billion in rental assistance, with $25 billion released so far, but the rollout has been slow.
  • Estimates of renter hardship likely skewed by statistical issues. Some higher-end estimates of rent delinquency have come from the Household Pulse Survey, a recent experimental dataset.

Download the Full Report Here

Is the U.S. Housing Shortage Poised to Get Worse?

by

What Is Driving Record Home Price Growth?

  • Median single-family home price grew an astronomical 24.4% nationally over the last 12 months
  • Even the slowest metro price growth was still 13.3% Y-O-Y
  • COVID-19 had an impact, but served more as a catalyst to the underlying demographic and supply trends

Demographic Trends Will Sustain Housing Demand

  • Over next 5 years, nearly 5 million Millennials will turn 33 each year, the median age of first-time home buyers
  • Some young adults forced back home due to the pandemic will move out and create new households
  • Housing construction is elevated, but rising costs and material shortages likely to keep supply short of demand

Strong Apartment Outlook Drawing Investor Interest

  • Looming wave of demand is motivating investors to engage in aggressive bidding for Apartments
  • Bid climate is driving up prices and may put downward pressure on cap rates

* Through June
Sources: Marcus & Millichap Research Services, National Association of Realtors

Watch the Video Below

Is Rising Inflation a Growing Concern for CRE Investors?

by

Headline inflation reached 5.4% in June, its highest level since 2008; well above Fed target of 2%

  • Fed believes inflation is transitory, driven up by short-term logistical bottlenecks and surge in consumption
  • Likely trying to keep interest rates low and money flowing

What are the Factors Driving Inflation?

  • Some inflation drivers are transitory, like commodity prices
  • But other strong drivers, such as rising wages and housing costs, tend to remain in place longer
  • If the inflation risks remain, Fed may be forced to take action earlier than expected and raise interest rates

Why Commercial Real Estate Investors are Well Positioned

  • Apartment, Industrial and Self-Storage saw strong Y-O-Y rent growth in 2Q, underscoring CRE’s inflation resistance
  • Low interest rates and high liquidity create great buying conditions, but future rise in rates may limit this window
  • High buyer demand also provides a prime opportunity for sellers that want to cash out or switch property types

* Through June
Sources: Marcus & Millichap Research Services, BLS

Watch the Video Below

Return to the Office Could have Major Implications for CRE

by

One of the Most Significant Factors Affecting CRE in 2021

  • As COVID-19 cases decline and vaccinations rise, restrictions against working in office are being lifted
  • Disconnect exists; many companies are pushing for full return to the office, many employees want more flexibility
  • Outcome will shape where people work, live and shop

Ramifications Likely to Play Out Over Multiple Years

  • As company procedures take effect, some workers may return to offices in major urban hubs, full- or part-time
  • Others may either work remotely or quit, and relocate
  • First signs of the decisions should start to appear in next few months; full impact could take years to unfold

How the Return to Work Could Play Out for CRE

  • If workers return to offices, hard-hit urban Office and other downtown properties would begin path to recovery
  • Even partial work in office could aid the recovery
  • Sustained work-from home would boost Apartment, Retail, and Industrial demand in smaller cities and suburbs

*As of April 2021
Sources: Marcus & Millichap Research Services, Digital.com

Watch the Video Below

Will a Surge in Summer Travel Bolster Commercial Real Estate Performance?

by

Summer Travel Might Provide Additional Economic Boost

  • Vaccination rates and lifted restrictions could bring a wave of pent-up summer travel and spending
  • Daily air travel in June is already 3 times higher than it was in the same period last year; only 24% below 2019 peak
  • Increased travel would benefit hard-hit cities and property types that rely on tourism

Travel and Tourism are Major Economic Drivers

  • Nearly 16 million jobs were supported by travel industry in 2019; pandemic layoffs severely impacted travel industry
  • Employers are aggressively hiring to meet summer demand, will boost household formation and spending

Hotels and Retail Biggest Winners, But All Sectors Benefit

  • Hotel occupancy levels in June were only 10% below same period in 2019, summer could further narrow gap
  • Increased summer spending not only supports travel and entertainment, but also Retail and Industrial properties
  • The job recovery will support the creation of new households, benefiting Apartment demand

*Through June 29, Trailing 7-day Average
Sources: Marcus & Millichap Research Services, Transportation Security Administration

Watch the Video Below

The Winners and Losers of the Fragmented CRE Recovery: A Tale of Two Cities

by

National Recovery is Just One Piece of the Story

  • The move towards a full national reopening will bode well for the economy and commercial real estate
  • But the pandemic has impacted every market differently, with some seeing rapid recoveries and others lagging

Fragmentation Occurring in Commercial Real Estate

  • Nationwide, Apartment and Retail rents are down slightly, Office is down moderately, and Industrial rents rose
  • However, Inland Empire and Sacramento Apartment rents rose 11% and 7%, while San Jose rents dropped 16%
  • This bifurcation is found across all property types and metros, creating drastic variance in the local level

Investors Must Pay Attention to Local Nuances

  • The situation can differ greatly from market to market, even within the same state
  • Investors should understand national trends, but also be aware of the variance between individual markets
  • Leveraging experts on particular property types and markets will be crucial for crafting an investment strategy
* As of 1Q 2021
Sources: Marcus & Millichap Research Services, RealPage, Inc., CoStar Group, Inc.,

Watch the Video Below: