The initial recovery in commercial real estate investment activity has been rewarding for life company lenders. Absent robust competition to originate mortgages to institutional borrowers, life companies have expanded their share of the secured debt market while working to hold the line on underwriting standards. It has not been a volume game. The enhanced liquidity from life company lending has been narrowly focused, with the lion’s share of the benefits accruing to a privileged class of well-heeled borrowers. In this segment of the market, life companies offer their most competitive terms. As debt market conditions improve, they are butting up against other lenders. For life companies, this more crowded landscape is a counterweight to improving economic projections and growth in the number of qualified borrowers.
This week marks Sam Chandan’s final column for The Commercial Observer, but fear not—Mr. Chandan will continue publishing his insights on the economy and finance in New York City and abroad each month in the pages of The Mortgage Observer.
The Commercial Observer was a gamble. The country was still in recession when the paper Read More
The Bank of Japan’s campaign of shock and awe is approaching its half-year anniversary. Early results are mostly according to plan. The economy expanded at a relatively brisk pace in the first quarter. Though it’s purportedly not the goal, the yen has fallen 20 percent against the dollar. The Nikkei’s broad stock indices are up sharply, even after last Thursday’s 7 percent dive. Retail sales data due this week could get a lift from a modest wealth effect. Read More
The CMBS market is on the rebound, and for retail property investors that means a substantial improvement in access to financing.
As of early May, nearly 40 percent of this year’s conduit loans were backed by retail properties, ranging in size from less than $1 million to $600 million at the extreme. Terms on those Read More
The inflation hawks were sent packing again last month when reports showed prices falling. The latest Economist poll of forecasters pegs inflation below 2 percent until at least 2015. That’s not far removed from the local view. As part of its expectation-setting exercise, the Fed sees its preferred measure—the personal consumption expenditures price index—holding below 2 percent now and over the long run. Read More
Construction lending has registered a marked improvement over the last six months, in top-rung metro areas and increasingly in secondary markets as well. During the financial crisis and for most of the period that has followed, development financing has been reserved for the most rarefied opportunities. With the exception of the apartment sector, the search for new projects has generally brought us back to New York and the other cardinal metros. Eager developers chancing upon opportunities elsewhere have found themselves hamstrung by hesitancy among potential anchors, reluctant banks and skeptical regulators. That is changing. Read More
The Senate has taken up the Marketplace Fairness Act, which would upend the overlong tax holiday for Internet commerce.
It’s not that online purchases have been tax-free. Unless you are in one of the few jurisdictions with no sales tax, your opportunity for a good-citizenship declaration of online purchases comes every April 15. Predictably, only a tiny share of American taxpayers seizes the chance. Read More
The events in Boston last week offered a harrowing reminder of our mortal condition. However durable, our peace is fragile. We can guard against acts of inhumanity, but we can never escape their possibility. We can agree that we are unbowed, but we are still changed. Read More
Ask someone if there’s a problem with American infrastructure and there’s a good chance he’ll point at the nearest bridge.
It needn’t be a grand structure. As a generation of Wharton alumni will confirm, crossing the Schuylkill by way of the modest South Street overpass was a risky proposition until just a few years ago. In its dying days, the bridge was closed to heavy vehicles but open to daredevil and presumably light-footed Penn students. The long-deferred move to replace the 1923 bascule bridge began in 2008, which happened to coincide with city engineers’ declaration it would not survive another winter. Read More
It’s been clear since long before the Great Recession that something is amiss in the labor market. Unbeknownst to the most recent crop of college graduates, this is not our first “jobless recovery.” That term was introduced to the popular lexicon in the early 1990s. It was revived in 2003; more than a year into that recovery, the turnaround in employment had never been weaker. In retrospect, those were halcyon days when compared with our current run.
What’s gone wrong? Read More
There are good reasons to envisage a refresh of Midtown Manhattan’s office inventory.
A prolonged lull in construction has left us with an abundance of heirlooms but few modish buildings. As a global center of finance, Midtown East’s built environment compares especially poorly with its peer markets. Average rents are much higher in London, but the premium over Midtown is less pronounced when comparing our small basket of best apples with theirs. Rezoning with an eye to new construction has its winners and losers. As new properties come online over the next decade, incumbents saddled with older buildings may find their highest and best use takes them outside the office sector altogether. Read More
Is the office obsolete?
The argument has been going on since before the Internet, when its antecedents were limited to connecting university research labs to the Department of Defense. The adoption of new technologies may afford smaller server rooms and fewer filing cabinets, but the location of people dominates everything else when it comes to office space utilization. At least on the margins, the data show we are using less office space for every employee. We cannot assume that reflects the impact of technology, but it’s not an unreasonable hypothesis. Read More
A run on the banking system is one of the surest paths to a credit crisis. The mechanics are simple: worried that their banks might fail or otherwise endanger their savings, consumers shift to their mattresses as preferred storehouses for cash. The expectation fulfills itself. In a fractional-reserve banking system, mass withdrawals drive institutions to insolvency. A failure of one bank raises the possibility that others could also fail. And so the process cascades. Read More
The debate over housing finance reform has taken place largely behind closed doors, with public discourse limited to speculation. Since the collapse of Fannie Mae and Freddie Mac into effective insolvency in September 2008, the public has been shielded from serious discussion about their future. At least for the time being, weakness in the housing market has encouraged the status quo; policymakers have sidestepped the question of the government’s long-term role in shepherding homeownership outcomes. Read More
In the shadow of the federal sequester, another even more intractable challenge to sustainable public finance reached a breaking point last week on a smaller stage.
Detroit, the cradle of the global automobile industry and once the nation’s fourth-largest city, is poised to cede its local sovereignty. Read More