Why Homes Are Getting Smaller, WeWork’s Adam Neumann Is Back

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Economic Watch: Lower September Inflation Keeps Fed on Track to Cut Rates

• The Consumer Price Index (CPI) rose by 2.4% year-over-year in September, slightly above expectations of 2.3% but down from 2.5% in August.

• Core inflation, which excludes food and energy prices, increased to 3.3%, also slightly above expectations of 3.2%.

• There were notable monthly increases in food, auto insurance and airfares. Energy prices fell by 1.9% and shelter inflation rose more modestly than in the prior two months.

• September’s inflation reading supports our expectation that the Fed will cut interest rates by 25 bps in both November and December.

• Lower interest rates should boost commercial real estate investment activity in coming quarters, although bond market volatility remains a headwind.

Why Homes Are Getting Smaller—but You’ll Pay About the Same Price link

• New construction homes shrank 3% from 2,098 square feet in 2022 to 2,036 square feet in 2023, marking the sharpest decline in a decade. Builders like D.R. Horton are cutting sizes to maintain affordability amid rising property prices.

• Builders are focusing on smaller homes to cater to affordability needs and demographic changes, including smaller households and delayed family formation. This shift responds to younger generations postponing marriage and having fewer children.

• With housing affordability under pressure since 2019, builders are betting buyers will prioritize metro areas over space. Smaller homes aim to meet the demand from one- and two-person households, which are increasing due to declining birth rates and longer lifespans.

Golf resurgence boosts revenues for resorts, hotels link

• Golf resorts saw revenue per available room grow 42% from 2019 to 2023, significantly outpacing the 27.7% rise in total operating revenue. Golf-related revenue per occupied room increased by 50.1%, reflecting rising demand among hotel guests.

• In 2023, off-course participation surged 115% with attractions like simulators and Topgolf drawing millennials back, contributing to a total of 45 million participants, up 36% annually since 2019. The National Golf Foundation reported 26.6 million rounds played in 2023, a 9.5% rise from 2019.

• Golf revenues doubled on a per-occupied-room basis in 2020 despite the pandemic, with total hotel revenue growing only 12.5%. Challenges remain with limited course development due to high construction costs, debt constraints, and environmental concerns.

Industrial vacancy rate levels off in Inland Empire link

• Leasing activity in Inland Empire surged to 12.2M SF in Q3 2024, rising by 3.5% from the previous quarter, marking the fourth consecutive quarter of growth. Supply deliveries dropped sharply to 2.1M SF, compared to 5.3M SF in Q2.

• The vacancy rate held steady at 6.8% after two years of steady increases, a significant change from the 1.3% low recorded in Q2 2022. Development pipeline construction hit a low of 11.6M SF, only a quarter of the 40M SF peak seen during the 2022 warehouse boom.

• Leasing for mid-sized buildings (250K SF to 499K SF) grew 70%, driven by a 22.5% year-over-year rise in imports at San Pedro Bay. However, net absorption turned negative at minus 234K SF, with the IE East submarket losing 1M SF, counteracting gains in IE West.

America’s Growing Hispanic Population link

• Hispanic Heritage Month (September 15 to October 15) celebrates the contributions of Americans tracing their origins to Spain, Mexico, Central America, South America, and Spanish-speaking Caribbean nations. These communities play a key role in shaping America's cultural richness.

• The U.S. Census Bureau highlights that the Hispanic population is essential in reinforcing the American motto, "E pluribus unum" (out of many, one). Their contributions reflect the nation's diversity and unity.

• Observing Hispanic Heritage Month is a reminder of the importance of cultural diversity, and the U.S. Census Bureau emphasizes their significance as an integral part of America's social fabric.

Office Market May Have Hit Bottom After Wave of Discounted Sales link

• Office properties saw steep discounts with seven sales exceeding $100 million in losses during Q1 2024, including a Midtown Manhattan building that sold at a 97% loss, amounting to a $276.5 million hit. This compares to only two such sales in all of 2023, signaling a new pricing benchmark.

• Office prices have dropped 12.4% year-over-year, and transaction volumes average $13.4 billion per quarter since 2023, compared to $35 billion pre-pandemic. This dip reflects continued market distress with many stakeholders delaying sales, waiting for improved market clarity.

• One-third of 2024's maturing loans failed to refinance or pay off on time, with many needing interest rates to fall 300-400 basis points. Despite market challenges, Parkview Financial sold seven loans at near full value to finance future lending operations.

WeWork’s Adam Neumann Is Back link

• Adam Neumann’s new Flow House in Miami will feature 466 luxury condos with prices starting at $450,000 for studios and $600,000 for one-bedrooms. The complex will open in 2025, adding 28,000 square feet of retail to the existing 9,000 square feet at Miami Worldcenter.

• Designed with wellness and community in mind, the development offers premium amenities like a resort-style pool, co-working spaces, a podcast room, and a yoga studio. Residents will also have access to a spa with sauna and steam rooms, alongside a rooftop restaurant and coffee lounge.

• The units will include high-end features such as floor-to-ceiling windows, private balconies, in-unit washers and dryers, and optional gourmet kitchens. OneWorld Properties will lead the sales campaign for the condos.

Zillow adds climate risk data to home listings as threats rise link

• Every Zillow listing now shows First Street risk scores for fire, flood, wind, air, and heat with projections 15 and 30 years into the future. This aims to help buyers make more informed decisions as climate risks intensify.

• In August, 16.7% of new listings showed wildfire risk, and 12.8% faced major flood risk. These risks are already impacting home values and insurance costs.

• North Carolina has only 4% of homes in FEMA flood zones, but First Street estimates 12% are at risk. This discrepancy highlights the need for more accurate risk assessments and insurance coverage.

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Vidit

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