March 12, 2022 Weekly Investor Update

Life Bridge Capital Weekly Investor Update

March 12, 2022

The Latest in Commercial Real Estate (CRE), Economy & Markets



Mortgage Rate (30-Year Fixed): 3.25% (as of 3/8)


Existing Home Sales: 6.7% (January 2022)

New Residential Sales: 16.2% (January 2022)

Median Sales Price for New Houses Sold: $423,300 (January 2022)

Construction Spending: +1.3% MoM (January 2022)

New Residential Housing Starts: 1.6 million (January 2022)

New Residential Housing Completion: 1.2 million (January 2022)


Homeownership Rate: +65.4% (3Q21)

Rental Vacancy Rate: +6.4% (4Q21)

Sources: NAR, BLS, Federal Reserve Bank, MBA

Note: Rates listed are estimates and may not reflect actual rates depending on term, sponsor location, and other factors involved.


Self-storage supply push demand stability

After the demand surge for self-storage facilities during the peak of COVID-19, prices are now back to their pre-pandemic levels, according to a report from Marcus & Millichap. The group predicts that the demand growth rate in the last two years will moderate within the year, driven by the uptick in supply. Investor demand for self-storage will remain strong, however, as it is considered one of the strongest inflation hedge alternatives in commercial real estate. Still, supply chain issues continue to affect availability of construction materials.

Commercial and institutional planning recover from construction woes after 3 months

The Dodge Momentum Index, a monthly survey of the initial report for nonresidential construction projects in planning and predicting the level of lead construction spending for the entire year, has finally recovered for institutional planning at 9% and commercial planning at 1%. After three months of consecutive drop in the index, planned spending for institutional projects was lifted by education and healthcare construction, while office and warehouse projects raised the value of projects for commercial building. The recovery indicates the construction industry’s slow return to normal amidst higher construction material costs and shortage of labor, according to Dodge Data & Analytics.

CRE investors challenged by higher inflation and rising interest rates

Rising inflation, more expensive construction costs, and labor shortage issues are some of the problems facing commercial real estate investors this year, according to the 2022 Q1 LightBox RCM Investor Sentiment Report. Almost 53% of industry professionals expect that investment activity will be higher than what was registered in the previous year despite inflation hammering demand for materials and consumer goods. The report also adds that multifamily and industrial assets will remain as top choices for investors in 2022.

February inflation reaches 7.9%

Higher energy and gasoline prices further raised inflation in February to 7.9%, along with higher costs for groceries, restaurant food, housing, transportation services and apparel, according to the Labor Department this week. The Federal Reserve is also bracing for a tumultuous impact brought by Russia’s invasion of Ukraine, since the former is a top global supplier of oil and natural gas. Russia’s supply of metals used in automobile and aircraft production, as well as raw ingredients for fertilizers used in food production, is also expected to push prices higher. According to The Wall Street Journal, businesses are expecting to pass some costs to consumers to chalk up profits.

Almost 6,000 homes sold $100k+ above asking price 

Redfin revealed that a total of 5,897 homes were sold for at least $100,000 over asking price at the beginning of 2022, up from 2,241 YoY. According to the real estate brokerage firm, homebuyers are in competition with other bidders for only a few supply of homes on the market. As a result, the median home-sale price was driven 14% higher YoY to $376,200. The report also indicates that many homebuyers rushed to close in the beginning of the year to take advantage of December’s lower mortgage rates at 3.1%. 

REIT mergers and acquisitions expected to fall in 2022

Publicly traded real-estate investors in the country experienced an all-time high number of trust mergers and acquisitions in 2021 valued at $140 billion total, according to Jones Lang LaSalle. But the momentum will not likely be sustained as company board members may take a step back in pushing large acquisitions should the Ukraine crisis become long-term. According to The Wall Street Journal, the ongoing war has already started impacting the global supply chain and U.S. economy through rising oil prices and inflation. REIT mergers and acquisitions exceeded analysts’ expectations last year after more deal-making was recorded.

Real estate investments associated with Russia now in peril

In a special report by The Wall Street Journal, real-estate developer Hines’ $2.9 billion investment in Russian malls, office buildings and rental apartments is likely to be impacted negatively by the US economic sanctions against the country. Although its investments in Russia only account for 1.8% of its $160 billion of assets, company executives are worried that they will suffer from backlash should it not cut ties with Russia. Although it has announced its condemnation of the attack, the company refuses to pull out of the country due to its ongoing commitments with local investors and partners.

Demand for life-sciences buildings surge during pandemic

Demand for construction of buildings that cater to biotechnology, pharmaceutical and other laboratory companies have surpassed expectations during the pandemic as billions of investment dollars were injected into research and development of a Covid-19 vaccine and other therapies for the virus, according to The Wall Street Journal. More than 31 million sq ft of life-sciences real estate was under development in 4Q2021, according to a report by the CBRE Group Inc. Most of the construction projects are in Boston, San Francisco, San Diego, Los Angeles, Denver and Boulder, Co., Chicago and Houston, with the buildings being located near medical universities. This has created countless new jobs in these areas.

Self-driving truck companies to raise real estate demand

The Wall Street Journal released a special report on Embark, a self-driving truck company that will begin its operations in California and Texas by 2024. The company announced that it will need to occupy transfer hubs that are close to highways where it can switch trucks to human drivers who will deliver the goods to their final destinations. It plans to initially lease these sites from Alterra. With the growth of these companies, Jones Lang LaSalle expects more investors to look for potential transfer hub sites and rent them out to trucking companies. 

NAR: International real estate sanctions will not directly impact US housing

The National Association of REALTORS’ 2021 International Transactions in U.S. Residential Real Estate Report indicates that international real estate sanctions will not have a large impact on the US housing market, since Russian foreign buyers account for less than 1% of foreign buyer purchases while total foreign buyers account for only 2% of existing-home sales. However, NAR warns that the continued oil price hikes can push inflation higher and eventually impact future interest rate demand, which is hampered by weaker global currencies and slower global growth rates.

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