Daily Briefing: 🏗️ Amazon's Texas-Sized Blueprint & Cadence's $50M Game-Changer 💰

September 16th, 2023 News Brief TLDR:

1. Amazon plants an 82-acre, 3.8M sq-ft job machine in Pflugerville 🏗️.

2. IPA leads DFW with $860M in multifamily asset sales, $1.6B pending 💰.

3. Austin snags $4M EPA grant for sustainable reuse warehouse 🍃.

4. Cadence invests $50M to tackle racial wealth inequities in housing 🏡.

REAL ESTATE MARKET TRENDS & INVESTMENT

Amazon has confirmed plans for a new 82-acre facility in Pflugerville, Central Texas

Source: MoorInsightsStrategy.com

Summary: The construction of this 3.8 million square-feet site is reflective of Amazon’s strategic growth in distribution capacity. Said to create 1,000+ new, full-time jobs, this facility adds to Amazon's footprint which includes 3 fulfillment centers to date, with another 2 currently under construction in the area.

Why this matters: With Amazon's continuing expansion in Central Texas, real estate professionals should spot opportunities for commercial, residential, and logistical land developments around these project sites to accommodate a surge in companies linked to this industrial growth.

Institutional Property Advisors Leads Multifamily Brokerage Sales in Dallas-Fort Worth

Source: MarketScreener.com

Summary: Institutional Property Advisors (IPA), a branch of Marcus & Millichap, continues to lead the multifamily housing market in Dallas-Fort Worth (DFW), with 15 completed asset sales worth $860 million and another $1.6 billion under contract or escrow in 2023. Transactions are on track despite the market volatility incurred in the past year. A new report from IPA revealed a significant decrease in the construction of new apartments in major Texan cities including DFW, Houston, Austin, and San Antonio, signifying even more bullish days for DFW with lessened supply and ongoing strong demand prompted by the area's robust job growth and population increase.

Why this matters: In a world where construction is stymying and supply is thinning out, this article prepares real estate professionals in Central Texas for a foreseeable increase in demand for apartment spaces which could drive significant investment opportunities in the multifamily sector.

Joint Venture Breaks Ground on 444-Unit Apartment Community in Metro Austin

Source: ReBusinessOnline.com

Summary: A joint venture between High Street Residential and a CBRE Investment Management-managed fund has begun constructing The Merle at Howard, a 444-unit apartment community in Pflugerville, a northern suburb of Austin. The project marks Phase I of a larger development, set to eventually include 1,400 units on a 60-acre site. The apartments, groceries, amenities, and delivery timelines are detailed, indicating a 2025 completion.

Why this matters: The commencement of such a large-scale residential project underscores a high demand for housing in the Austin suburbs. It offers commercial real estate professionals an opportunity to identify similar growth pockets, thereby aiding decision-making on profitable investment and development ventures.

Single-Family Permits Decline in July 2023

Source: EyeOnHousing.org

Summary: Single-family permits have significantly declined by 18.4% year-over-year nationwide as of July 2023 with Texas seeing the highest number of permits dropping by 20.3%. Among the top ten markets issuing the highest number of these permits, Austin-Round Rock, TX had a significant decline of 39%. Also, the multifamily permits declined by 19.3% in Texas with Austin-Round Rock, TX seeing a drastic decline of 32%, making it a notable matter concerning residential real estate health.

Why this matters: The recorded drop in permit numbers signifies tighter housing inventory in commercial properties in and around Austin - understanding this can empower agents to strategize their negotiations, timing and pricing, keeping the demand surpassing the declining supply trend in sight.

Income Ranking By Metro: Cities That Pay The Most

Source: FinancialSamurai.com

Summary: The U.S. Department of Commerce has recently analyzed the highest-income city metros; in order of greatest income yield, these include San Jose- Sunnyvale- Santa Clara, CA; Bridgeport-Stamford-Norwalk, CT; San Francisco-Oakland-Berkeley, CA; Boston-Cambridge-Newton, MA-NH; and Seattle-Tacoma-Bellevue. It projects Northwest Arkansas, Provo-Orem, Austin, Nashville, Charleston, Milwaukee, and Raleigh as next up-and-coming regions. This raises points like the continued growth of tech and finance jobs in areas such as these are positively impacting the real estate market developments; in fact, Austin, TX, had jumped 46 places from the ranking it held some decades ago, positioning itself as 9th due to increasing job and infrastructure growth. Furthermore, tapping into this information to better strategize real investment in upcoming high-income metros is recommended.

Why this matters: Understanding growth trends and forecasting boom cites such as Austin can provide commercial real estate professionals with direction for future investments and provide clients with assessing opportunities for long-term commercial gains.

PACE: The chameleon of CRE financing

Source: ReJournals.com

Summary: PACE (Property Assessed Clean Energy) financing is continuing to increase in accessibility and utility, providing advantageous solutions for diversified market turbulence. It is a privately funded, long-term, low-cost, financing strategy that can reduce equity or senior debt and augment returns by taking advantage of energy efficiency, renewable energy, water conservation, flood mitigation and seismic retrofits. Interestingly, it is being effectively used in each stage of a fluctuating market: when construction financing is abundant, scarce, or when liquidity is the necessity. The Grove, a senior living facility located in a mixed-use community in Austin, Texas, employed PACE to boost leverage by 10%, leading to cash equity reduction and increased proforma IRRs.

Why this matters: Commercial real estate professionals in Central Texas, like those at the new project at the Grove in Austin, can take advantage of PACE to optimize financing for eco-friendly project elements, that would facilitate lean capital structures, higher return rates, and even ensures liquidity by retroactive financing.

The 5 Best-Performing REITs Under $5

Source: Finance.yahoo.com

Summary: The article provides an overview of the top 5 best-performing Real Estate Investment Trusts (REITs) trading under $5. Some of the highlighted REITs include Industrial Logistics Properties Trust, Lument Finance Trust, Brandywine Realty Trust, Generation Income Properties, and Braemar Hotels & Resorts. Each of these trusts made noteworthy performance despite wider market volatility. Factors such as asset types, current investments (particularly in states such as Texas and Florida), return statistics, and insider activities provide insights into their strategies and market optimism.

Why this matters: Relevant to Central Texas' commercial real estate professionals is Lument Finance (focused on commercial estate debts, particularly in the Texas multifamily sector) and Brandywine Realty Trust, which recently sold an office building in Austin, Texas. Their strategies, performance, and sector focus can guide professionals in portfolio diversification or help them derive insights for investment recommendations to their clients.

CAP Multifamily institutionalizing small assets, JPI proliferates in DFW

Source: TheRealDeal.com

Summary: CAP Multifamily is looking to institutionalize small multifamily housing, planning to build a small apartment building in North Dallas, focusing on territories that used to hold single-family lots. The company's investment focus spans a 39-unit building poised to cost around $6.6 million. Meanwhile, established constructor JPI, based in Irving unraveled an impressive tally of units in the pipeline — around 2000 units, spread across Dallas-Forth Worth. In more news, Harbor Group International has acquired the Warner, a 336-unit apartment complex in Round Rock, a promising sign for further real estate activity in the Austin metro area.

Why this matters: The acquisition of a large apartment complex in Round Rock by Harbor Group International in the Austin metro area indicates a prospering market, highlighting a potential interest point for investors and new opportunities for Central Texas commercial real estate professionals.

Homebuyer confidence is growing in Austin with an August increase in closed home sales

Source:Austin.culturemap.com

Summary: The Austin Board of Realtors has reported growth in homebuyer confidence in Austin, with the first year-over-year increase in closed home sales since February 2022. Growing housing inventory suggests that buyers might get more selective, marking a turn in a hitherto highly competitive market. Despite this, Austin's high development taxes are posing a barrier to new home construction, squeezing the supply further. As potential sellers are expected to wait longer due to rising mortgage rates, forecast for the rest of 2023 remains uncertain. Notably, median home prices in Austin-Round Rock Metropolitan Area dropped by 7.6% to $460,000 this year to date.

Why this matters: Possessing knowledge about the local housing market trends, rising buyer expectations, and inflation-adjusted prices, as well as holding a keen understanding of the impact of development taxes on construction rates, equips commercial real estate pros to provide detailed guidance and deliver valuable insights to their developer clients or to potential investors who might be eyeing the Austin market.

SOCIAL IMPACT & SUSTAINABILITY IN REAL ESTATE

Austin selected to receive $4 million grant to create reuse warehouse

Source: AustinTexas.gov

Summary: The City of Austin is set to receive a $4 million grant from the U.S. Environmental Protection Agency (EPA) to create a reuse warehouse. The facility will be aimed at furnishing homes for those transitioning out of homelessness initially, with the potential expansion of accepting deconstructed building materials for future use and offering workforce training. The preventive initiative aligns with Austin’s Climate Equity Plan targeting waste reduction, sustainable use of raw materials, and its objective of achieving zero waste by 2040.

Why this matters: As commercial realtors, this initiative opens channels for collaboration towards public projects and strengthens inclusive growth sentiment, and this investment in infrastructure strongly signals an increased importance of sustainability factors in assessing real estate viability.

GEOGRAPHIC & LIFESTYLE CONSIDERATIONS

Considering spending your later years in the Sunshine State? Here's why you should NOT retire in Florida

Source: Dailymail.co.uk

Summary: Florida, a traditionally popular retirement destination, faces a reconsideration. High home insurance premiums due to natural disaster vulnerabilities, potentially escalating due to climate change, exert financial pressure on retirees. In addition, the lack of a state income tax in Florida is offset by high property taxes and other levies in certain counties. These turbulences in the Florida market are leading retirees to consider the relative stability of other states like Texas, specifically burgeoning cultural hubs such as Austin, Houston, and Dallas where the cost of living is generally more affordable. Texas, like Florida, has no state income tax.

Why this matters: Real estate professionals in Central Texas, notably dealing with commercial properties suitable for retirees, can leverage this dynamic shift away from Florida, emphasizing Texas' fiscal benefits and diverse cultural scenes in investment purpose discussions.