Office to industrial space is picking up steam

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2025 mortgage rate forecasts per prominent outlets  link

• Mortgage rates are projected to drop slightly due to easing inflation and a slight rise in unemployment. Experts like Fannie Mae and MBA expect the Federal Reserve to cut rates, leading to modest decreases in mortgage rates.

• Home sales are forecast to rise, with about 5.4 million homes expected to sell in 2025, compared to 4.8 million in 2023. Lower mortgage rates will help bring more buyers and sellers back to the market, although the shift won’t be dramatic.

• Home prices are expected to rise moderately by 2.6% nationally. Price changes will vary by location, but overall growth will be slower than in previous years.

Property insurers retreat from industrial, multifamily amid widespread softening link

• Property insurers are pulling back from industrial and multifamily sectors due to increasing risk and declining profitability. As a result, developers and property owners are struggling to find adequate coverage in key markets.

• Climate change-related disasters and inflation are pushing up insurance claims, making it more expensive for insurers to stay in these markets. Insurers are also raising premiums, which is impacting operational costs for owners.

• Some cities like Miami and Los Angeles are particularly affected by these insurance issues. These markets are seeing some of the highest premium increases, reflecting growing concerns over natural disasters and property risk.

Converting office to industrial space is picking up steam link

• The trend of converting offices to industrial spaces is accelerating due to rising e-commerce and shifts in work-from-home. Office vacancies are making these buildings more suitable for logistics use, especially in urban areas.

• Developers are targeting properties with high ceilings and good structural integrity for conversion. Cities like New York and Los Angeles are seeing more of these projects due to high demand for urban industrial spaces.

• Construction costs for conversions are lower than new builds by up to 30%, making them attractive for investors. This approach also shortens timelines, helping meet market demand faster.

Commercial mortgage delinquency rates increased in the second quarter of 2024 link

• Delinquency rates for commercial banks and thrifts rose to 1.15%, a 0.12% increase from the previous quarter. Meanwhile, life company portfolios saw a decrease in delinquencies to 0.43%.

• CMBS loans had the highest increase in delinquency rates, jumping to 4.82%, up by 0.47% from Q1 2024. Freddie Mac also experienced a slight rise, with delinquencies reaching 0.38%.

• Office loans, representing $740 billion in debt, remain a major concern in the market. The total commercial mortgage debt outstanding is $4.7 trillion, with different sectors performing unevenly.

Florida’s retail sales growth outpaces national average

• Florida's retail sales have grown 4.2% year-to-date, compared to the national average of 3.1%. This higher growth rate shows Florida's stronger consumer demand and economic activity.

• The state's population growth, boosted by migration from other regions, is a major factor driving retail sales. New residents bring increased spending on essentials like groceries, furniture, and clothing.

• Major cities like Miami, Orlando, and Tampa have seen the largest retail sales spikes. These areas benefit from high tourism and a strong local economy.

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Where Are New York City Buyers Coming From? link

• The number of buyers from New Jersey dropped significantly, with 345 homes purchased in the first half of 2024 compared to 487 in 2014. Connecticut also saw a decline, from 129 sales in 2014 to 118 in 2024.

• Californian buyers have surged, with 244 purchases in 2024, up from 175 in 2014. They have overtaken Florida as the second most active out-of-state buyers, with Florida accounting for 219 sales.

• Local buyers from New York state still dominate, but they purchased fewer homes (11,579 in 2024 vs. 15,781 in 2014). Queens buyers led the city but their numbers also fell from 4,329 in 2014 to 3,247 in 2024.

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Link to the listing

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Vidit

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