Sunday Summary: Trump Administration 2.0 Cometh

A lot of us on the coasts were caught off guard Tuesday night when we witnessed the scale of Donald Trump’s Election Day victory.

It was not a process that dragged on for days while both sides advanced their case for victory. No absentee ballots or recounts would reverse the outcome. It was definitive.

And a lot of people in commercial real estate were pleased with the finality of it.

“With the election results settled, the real estate market will benefit from the reduction in uncertainty,” said ​​Adelaide Polsinelli, vice chair of Compass. “Lower capital gains taxes, which Trump has previously supported, could encourage more frequent buying and selling, potentially increasing transaction volume across residential and commercial real estate.”

“There’s a perception of Trump being good for real estate — obviously, it’s where he came from — and I think that people have been hesitant to jump back into the market over the last six months based on the election,” said Shaun Pappas, an attorney from Starr Associates. “I think now we’re at a point where we know what we’re in for, and, whether you like it or not, or whatever your political leanings are, at least you have a foundation of stability and knowing who’s going to be in charge.”

The stock market reacted with a spike of more than 1,500 points on the Dow. (Although, strangely, a number of real estate stocks went down the day after the election, but most eventually recovered.)

“At the end of the day, when you take out all the emotion and you exclusively look at the financial components of the election, the markets are saying that this is a positive for real estate,” said Briggs Elwell, CEO and co-founder of RLTYco. “Knee-jerk reactions happen, but the reality is that the front-runner that’s driving the market surge are the banks, and they’re banking on the fact that under a Trump administration you have a trend towards lower rates, and you’re going to have less regulation at the end of the day.”

And on Thursday the Fed announced a cut of 25 basis points, which will no doubt give another kick to the economy. (Fed chairman Jerome Powell said the election would have no effect on any of the Fed’s decisions in the near term, and added that he would not step down before his term was up, despite the fact that the president-elect blasted Powell earlier this year.)

All of which is in keeping with expectations; and, even before the election, a lot of bankers were girding themselves for a busy 2025.

“Across the industry, we are starting to see a slow ramp toward normalization,” said Al Brooks, head of commercial real estate at J.P. Morgan Chase. “Fundamentals remain strong in areas like multifamily, and there are certainly sectors like office where it will take some time to understand the new demand.”

More reports coming in…

The earnings calls continued trickling in with some of the heavies of the industry getting the good and the bad off their chests.

Vornado Realty Trust (VNO) reported a dip in cash flow compared to the third quarter of last year ($99.25 million versus $119.48 million) but the firm could also boast about signing a 1.1 million-square-foot master lease with NYU for 770 Broadway.

Howard Hughes Holdings reported that the company reeled in $145 million from its master-planned properties (which was not just better than expected, but a company record) as well as another $53 million in land sales, marking a 163 percent increase in revenue compared to last year.

JLL saw its adjusted EBITDA shoot up 37 percent year-over-year. “The office sector, which saw both increased field size and transaction volume, led the acceleration with 34 percent growth,” said Karen Brennan, the company’s chief financial officer.

Capital markets revenue was up 18.5 percent for Newmark, and its company-wide revenue was up 11.8 percent (to $685.9 million), beating their expectations.

Cushman & Wakefield saw leasing grow 13 percent last quarter and reported $2.3 billion in revenue (a 3 percent uptick) while being careful not to get too far out over their skis. “This quarter marked an important turning point,” said C&W CEO Michelle MacKay. “The strategic work we have completed over the past year has created meaningful growth opportunities for our business, and we are energized to deliver on these priorities in the years ahead.”

In multifamily, AvalonBay Communities could boast $450 million in new developments last quarter, and the company said it will reach $1.1 billion total in new developments by the end of the year.

Retail redux

The last few weeks saw some impressive office leases, but last week was mostly about retail. Specifically, fitness and wellness.

Over in Long Island City, Vibe Fitness took a muscular 55,000 square feet at 10-04 Borden Avenue, and, in Hudson Square, Equinox took a bulky 30,248 square feet at 75 Varick Street.

Wellness brands like Saint took space at 243 West 28th Street and another wellness brand (or wellness apparel, anyway) Alo Yoga stretched into 76 Front Street in Dumbo; but, of course, there were other retail leases, too. Italian menswear brand Boggi Milano tied itself to 115 Mercer Street, and Princess Polly (an Australian fashion brand) thought it was a g’day to take space at 514 Broadway.

The last two leases are particularly interesting because they’re in SoHo, which has been on a sales and leasing roll recently.

Rents have been climbing and properties have been trading hands. Some $259.8 million has been invested in SoHo so far this year, and $101.1 million of that was for retail.

“In SoHo, the traffic is almost limitless,” said Aurora Capital Associates’ Jared Epstein. “Everyone wants to go there and shop there. There’s not a neighborhood in Manhattan that compares to it in terms of a retail district.”

It’s true, some of the sales have involved distressed properties, but the average asking rent for retail space in SoHo was $481 per square foot as of July according to REBNY, which represents a 28 percent jump from the previous year.

Ooh La Lenders!

Finally, on the same day that the bombshell of the election was going off, CO published one of our signature issues of the year — our Lenders Magazine.

This is where we sat down with some of the best and brightest allocators of capital and asked them their views on the state of the market, on life, and their preferred movies.

The Q&As are worth perusing, as well as the accompanying sidebars and features on who the next Fed chairman could be; what interest rates will look like next summer; what it took to stay alive ’til `25; and a lender-on-lender interview between Thorofare Capital’s David Perlman and Northwind Group’s Ran Eliasaf.

And, if all the political talk makes you crazy enough to want to leave planet Earth behind, Larry Connor could help you. CO has a fascinating profile of the 74-year-old Miamisburg, Ohio-based head of The Connor Group in last week’s issue that can take anyone’s mind off politics.

See you next week!