Weekly Advantage | August 5th

Some interesting info from the last week or so. Summary bullet points following each link. This will go out Thursday mornings from now on, instead of Friday, so it doesn’t get too lost in the weekend shuffle.

10 predictions for the world in 2030 – Capital Group Advisors

(Really worth the actual read – lots of good supporting graphics and stats for each, too)

  1. Health care innovation will reach warp speed
  2. A cure for cancer may be around the corner
  3. Cash will be but a distant memory
  4. Semiconductors will be everywhere – and in everything
  5. Wearable tech will blur the lines of reality
  6. Digital entertainment (streaming) will take center stage
  7. Autonomous vehicles will hit the fast lane
  8. Green machines will rule the road
  9. Renewable energy will power the world
  10. Innovative companies will make the world better

OfficeNew pandemic-proof office concept?Bisnow

  • Developer proposed turning 19 houses in a residential subdivision into 70-75 private office suites with shared outdoor amenities.
  • Suites of ~350 SF for rent for ~$55-$60 per day. Each equip with personal bathroom and kitchenette and parking spot.
  • New definition of “hybrid” working model?

Investment/RetailDollar stores cap rates fall in Q2Globe St.

  • In the second quarter, national asking cap rates in the single-tenant dollar store sector fell to 6.11%.
  • Dollar stores benefited from a ‘flight to safety’ by investors during the pandemic.
  • Many 1031 exchanges within the sector, adding to demand.
  • Usually are longer-term leases, do well during economic uncertainty, and are generally e-commerce resistant.

Industrial Great Lakes/St Lawrence ports report surge in cargo shipments to feed domestic construction and manufacturing activity – RE Journals

  • General cargo (up 61%) continues to be driven by steel imports from Europe.
  • Year-to-date iron ore volumes via the St. Lawrence Seaway are up 14%.

IndustrialSemiconductor chip shortage continuesCNBC, Moody’s

  • Because the chips are so intricate, it takes a relatively long time to manufacture them, and even longer to distribute them, so any interruption in the supply chain is (still) magnified.
  • Can take years to build the infrastructure to create more supply (new factories, sourcing and installing proper technology to manufacture the chips, etc.).
    • Therefore only a select few companies control much of the supply-side; and barrier to entry is high.
    • Newer chip tech is more profitable, so older gen chips aren’t being focused on as much by suppliers.
  • GM truck plants in Flint, Mexico, and Indiana are all shutting back down next week due to chip shortages.
  • Will likely deal with shortages into 2023, although countries around the world are investing billions into chip R&D.

CHANGE UPs Dick DeVos

STAT OF THE WEEK:

6.50% annualized 2Q21 GDP growth (US)

  • Largest quarterly annualized growth since 2003 (not counting a 33.4% bounce-back in 3Q20, after the worst recording ever in 2Q20)
  • For comparison:
    •  +2020 GDP growth: -3.49%
    • +2019 GDP growth: 2.16%

GRAPH OF THE WEEK:

Average days on market for commercial property through 1H21. This is national data; however it shows the clear trend across all property types that transaction velocity has been increasing significantly (DOM down) since 3Q20.

KEEP AN EYE ON:

Last Sunday night, a group of bipartisan Senators revealed a federal ‘Infrastructure and Jobs’ bill totaling $1.2 TRILLION (about $550B specifically for physical infrastructure projects). This bill will have far-reaching effects if passed, including on the commercial real estate industry.

Some of the areas affected would include:

-Ports/waterways

-Airports

-Rail

-Roads & bridges

-Environmental remediation

-Utility access/improvements

-Broadband internet improvements

-JOBS, JOBS, JOBS

**We’ll take a deeper dive into its potential impact, and how it gets funded, once voted on.

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