Real Estate Daily News Buzz is designed to give news snippets to readers that our (yet to be award winning) editors thought you could use to start your day. They come from various business perspectives, real estate, government, the Fed, local news, and the stock markets to save you time. Here you will find the headlines and what the news buzz of the day will be.
Wednesday, the Dow Jones industrial average dropped 252.15 points, or 1.5%, to 16,906.51. The Standard & Poor’s 500 index lost 26.45 points, or 1.3%, to 1,990.26. The NASDAQ composite slid 55.67 points, or 1.1%, to 4,835.76.
U.S. benchmark crude sank $2, or 5.6%, to close at $33.97 a barrel in New York. Brent crude, a benchmark for international oils, fell $2.19, or 6%, to close at $34.23 a barrel in London. The price of wholesale gasoline sank 9.5 cents, or 7.6 per cent, to $1.162 a gallon. Heating oil sank 4.5 cents, or 4%, to $1.081 a gallon. Natural gas declined 5.6 cents, or 2.5%, to $2.267 per 1,000 cubic feet.
U.S. Apartment Vacancies Climb as New Buildings Crowd the Market “U.S. apartment vacancies rose in the fourth quarter as a construction surge in pricier urban locations overshadowed rising demand for older properties in the suburbs, Reis Inc. said. The national vacancy rate averaged 4.4 percent in the three months through December, up from 4.3 percent a year earlier and in the third quarter, the New York-based research company said Tuesday. Vacancies rose from the previous three months for a second straight quarter -- the first time that’s happened since 2009.” (Bloomberg)
Why the Best Investment in 2016 Might Be Global Real Estate “Market consensus now has equities flat to negative in 2016. Much of it is due to rate hikes and an end of QE in the U.S. After that, China and oil are to blame for everything else. It’s hard to find an equity bull except at the value funds. Bonds? Forget about it. Outside of a handful of emerging market local currency debt, global bond fund managers are bracing for a drought. So where’s the safe haven with a plausible return on investment this year? For Colliers International, 2016 is the year of real estate.” (Forbes)
Commercial Developers Build Small to Score Big “A growing number of builders have seized on what they believe is an underserved segment of the city’s office market: pint-size, yet deep-pocketed tenants who want to be in new, high-end buildings tailored to their diminutive footprints. At least six developers are constructing or readying to break ground on boutique office properties. The buildings are generally smaller than 200,000 square feet, a fraction of the size of recently opened 1 World Trade Center, which is 3 million square feet, or the 2.6 million-square-foot office skyscraper rising at 30 Hudson Yards.” (Crain’s New York Business)
Why More Retailers Could Default in 2016 “Last year was grim for retailers. This year could be even worse. Despite a late surge in holiday sales, companies like J. Crew Group Inc. and 99 Cents Only Stores are struggling under debt they took on in leveraged buyouts years ago. Their bond prices have plummeted -- in some cases to as little as 25 cents on the dollar -- as investors brace for possible defaults. The industry has been limping along for a while now due to a variety of forces.” (Bloomberg)
Behind a Shopping Center in New Jersey, Signs of Mass Extinction “Behind a Lowe’s home improvement store here, scientists are methodically scraping and sifting through a quarry pit that may contain unique insights to the mass extinction that eliminated the dinosaurs. Back then, about 66 million years ago, the oceans were higher, and this part of southern New Jersey was a shallow sea, 10 to 15 miles offshore from an ancient mountain range that rose from the water.” (New York Times)
Sears: Auto Centers Reveal Big Picture Problems for Company “We believe that many investors have artificially inflated the value of Sears by valuing the real estate of Sears independent of the underlying retail business. Because Sears continues to lose money the net asset valuation calculations used by investors fail to account for these ongoing losses, and thus their calculations might be artificially high.” (Seeking Alpha)
The City That Shelly Built “Sheldon Silver may have had just one vote, but a “no” from him carried more weight than any other politician in the state legislature. For developers, it could be the kiss of death. The former state Assembly speaker — who was recently convicted on federal corruption charges involving $4 million in kickbacks — was one of the three most powerful men in Albany, along with the governor and Senate majority leader.” (The Real Deal)
U.S. Home Prices Forecasted to Uptick 5.4 Percent in the Coming Year “According to CoreLogic's Home Price Index (HPI) for November 2015, U.S. home prices are up both year-over-year and month-over-month. U.S. home prices nationwide, including distressed sales, increased by 6.3 percent in November 2015 compared with November 2014 and increased by 0.5 percent in November 2015 compared with October 2015, according to the CoreLogic HPI.” (World Property Journal)
New Mixed-Use Development Planned Across from Westin Book Cadillac Downtown “If you’ve been outside the Westin Book Cadillac Hotel in the past year or so, you’ve likely noticed the building directly across the street and its colorful, distinctive artwork that wraps around its first floor. You can expect to say goodbye to it soon, developer Richard Karp told me this morning. He plans to tear the building down to make way for a mixed-use development with a multifamily component.” (Crain’s Detroit Business)
Do Brokerage Alliances Matter? “Both Sotheby’s and its main rival, Christie’s, have real estate ties – Christie’s via affiliated firms like Brown Harris Stevens in New York, and Sotheby’s through wholly-owned offices as well as affiliated brokerages. These affiliations are touted by property brokerage chiefs as an elite referral network that can generate buyer and seller leads and result in lucrative property sales. ‘The same people who buy important art buy important real estate,’ Hall Willkie, president of BHS, said in a promotional video on Christie’s website.” (The Real Deal)
Trying to right itself, Chipotle hit by criminal investigation — Chipotle reported a sales plunge of 30 per cent for December after a series of food scares at its restaurants and disclosed that a federal criminal investigation tied to the sickening of customers has begun. The company said in a regulatory filing that it was asked to produce a broad range of documents tied to a norovirus outbreak this summer at its restaurant in Simi Valley, California, but declined to provide further details. It said the investigation does not involve a more recent E. coli outbreak tied to its restaurants that sickened people in nine states, or a separate norovirus outbreak in Boston.
Apple stock slumps amid iPhone sales worries — Apple fans keep buying iPhones, but Wall Street keeps worrying the company won’t be able to match last year’s blistering sales pace. Shares in the world’s most valuable company have fallen more than 15 per cent over the last month, amid a drumbeat of news reports that some Asian parts suppliers are expecting Apple to trim orders for its signature smartphone this winter. Those fears were compounded Wednesday when the Wall Street Journal said one of Apple’s most important contractors is sending some workers home on “early holiday” before the Chinese New Year in February. Even an upbeat report from Apple announcing that its online App Store set a sales record last week failed to boost the stock.
Netflix expands into 130 more countries in surprise move — Netflix has already crossed off the biggest item on its New Year’s list of resolutions. The Internet video service debuted in 130 countries Wednesday in a surprise move likely to reel in millions of new subscribers. CEO Reed Hastings revealed the scope of Netflix’s expansion at the end of a presentation in Las Vegas at CES, one of the technology industry’s marquee events. The news caught almost everyone off guard because Netflix had previously set a goal of being available in most of the world by the end of this year. It looked like the Los Gatos, California, company had plenty of work ahead it because it ended December in 60 countries.
China announces plan to limit large share sales — China plans to restrict stock sales by large shareholders once a ban imposed in July to stop a slide in prices is lifted this week. Stockholders who own more than 5% of a company will be required to sell shares through private transactions to “avoid shocks to the market,” the China Securities Regulatory Commission said on its microblog. Regulators are winding down emergency measures imposed after China’s main market index plunged more than 30% in June.
Fed minutes: Some saw December rate hike as ‘close call’ — Despite the Federal Reserve’s unanimous vote to raise a key interest rate last month, some policymakers viewed their decision as a “close call” because of stubbornly low inflation. Going forward, officials believed economic conditions would likely justify “only gradual increases” in its benchmark rate, minutes of the Fed’s December meeting released Wednesday showed. The Fed boosted the rate by a quarter point to a new range of 0.25% to 0.5% in December. It had been at a record low near zero for the past seven years.
World Bank downgrades global economic forecast for 2016 — The World Bank has cut its forecast for global growth this year given weakness in the developing world. The aid agency said Wednesday that it expects the world economy to expand 2.9% in 2016, down from the forecast of 3.3% it made in June. The global economy grew 2.4% in 2015. Several big developing economies — including Brazil and China — are slowing or shrinking. Their troubles have disproportionately hurt their smaller trading partners, which have also been squeezed by depressed commodity prices.
Survey: US businesses add 257,000 jobs, most in a year — U.S. businesses stepped up hiring last month, led by solid gains in construction and retail, a private survey found. Payroll processor ADP said Wednesday that companies added 257,000 jobs in December, the most in a year. Construction companies added 24,000 jobs, while retailers and shipping firms added 38,000. The figures suggest that employers are still hiring at a healthy pace, even as overseas economic weakness and the strong dollar have hit U.S. manufacturing.
Monsanto eliminating 1,000 more jobs to cut costs — Monsanto said Wednesday it will eliminate another 1,000 jobs as it expands a cost-cutting plan designed to deal with falling sales of biotech-corn seeds and other financial headwinds. The additional layoffs will bring the agriculture giant’s total planned cuts to 3,600 jobs over the next two years, or about 16% of its global workforce. The St. Louis-based company says the restructuring will cost between $1.1 billion and $1.2 billion to implement. By the end of fiscal 2018, the company expects the changes to generate annual savings of $500 million.
Macy’s to cut up to 4,800 jobs after weak holiday sales — Macy’s is cutting up to 4,800 jobs after disappointing holiday sales. The Cincinnati-based department store chain says sales fell 5.2 per cent in November and December at existing stores. Warm weather and lower spending by international tourists hurt sales. The company also listed Wednesday which 40 stores it would close. It had announced it was closing stores in September.
Valeant names Howard Schiller as interim CEO -- Valeant Pharmaceuticals has named former finance chief Howard Schiller as interim CEO while the troubled drug company’s chairman and chief executive remains hospitalized with severe pneumonia. Valeant said Tuesday that J. Michael Pearson is still on medical leave, and it did not know when he would return. Schiller will become interim CEO immediately and Robert Ingram, the company’s lead independent director, will serve as interim board chairman.
VW exec sees US fixes soon in emissions test cheating — The top executive of the Volkswagen brand worldwide says he’s optimistic that U.S. environmental regulators will approve fixes within the coming weeks or months for diesel engines that cheat on emissions tests. Brand CEO Herbert Diess said Tuesday night at the CES gadget show in Las Vegas that the company is having constructive discussions with the U.S. Environmental Protection Agency and the California Air Resources Board. But the EPA didn’t sound as optimistic, issuing a statement Wednesday saying that talks with VW so far “have not produced an acceptable way forward.”