Power Reads: 5 Interesting Articles That Will Help You This Week

Each week, I select a few articles that rise above the fray and hopefully help you on your journey in leadership and the CRE world. They pull from one of four "corners": corporate real estate, technology, management science and anything positive. Each day we can become a better version of ourselves.

1. Office In 'A Period Of Creative Destruction' As Owners Search For What Actually Gets Workers In

In the slow return to the office, landlords are in a fight for survival, and amenities have become their weapon of choice.

““What I’m seeing in the boutique office market ... is a bifurcation of products into winners and losers, there is a certain group of product that has amenities and intrinsic features that draw employees back to the office that allow employers to help employees, and this is what is very much in demand,” Rockrose Development Director Ted Traum said at Bisnow’s State of the New York City Office Market event this week.”

“You have to be very surgical … in the past, you could say, ‘I just want exposure to the New York office.' Almost anything within certain parameters would do," he added. "Now you have to be extraordinarily cognizant of what it is that makes it a winner.”

2. Amazon Looking To Shed 10M SF In Warehouse Space

In an effort to shed its excess warehouse capacity and shore up its bottom line, Amazon has reportedly made plans to sublet at least 10M SF in warehouse space across several key markets — including Atlanta, New York, New Jersey and Southern California — with plans to potentially vacate triple that number.

“Sources speaking anonymously to Bloomberg said the company may even attempt to negotiate ending existing leases. ”

If Amazon indeed lets go of 10M SF of warehouses, it would represent only 5% of the space it added over the last two years, Bloomberg said. It also reported Amazon is being cautious by considering short sublease periods of one or two years in case it sees demand to expand again soon. E-commerce sales are down from their early 2020 peak but are fluctuating quarter-over-quarter and are still well above pre-pandemic levels.

3. Lumber Prices Slump With Rising Interest Rates

Lumber prices have come crashing down in a new sign of how rising interest rates are deflating markets that boomed during the pandemic.

“Wood prices were a leading indicator of the supply-chain problems and inflation that followed pandemic lockdowns. Prices shot up in the summer of 2020 as cooped-up Americans remodeled en masse and demand for suburban houses soared. By last spring, lumber cost more than twice the prepandemic high. Now, two-by-four prices are flashing caution.”

Lumber futures for July delivery ended Friday at $695.10 per thousand board feet, down 52% from a high in early March. On-the-spot wood prices have plunged, too. Pricing service Random Lengths said Friday that its framing composite index, which tracks cash sales, fell about 12% last week to end at $794. That is down from $1,334 in March, just before the Federal Reserve raised interest rates for the first time since 2018.  

Lumber-futures price, weeklySource: FactSetNote: Random length, continuous contract

4. The Tech Crash Could Be a Talent Bonanza for Big Tech

The battle for tech talent is entering a new phase—and the winners are likely to be the world’s biggest tech companies.

“Apple, Amazon, AMZN 3.66%▲ Microsoft, Google and Facebook FB 1.83%▲ parent Meta Platforms have spent years battling for engineers and other skilled workers with each other and the rest of the tech landscape—including legions of cash-drunk startups dangling stock that might someday spell megawealth. Now, as the tech industry is hit by tumbling stock prices and recalibrated financial projections, companies large and small are slowing their hiring and even laying off workers. Even given these challenges, though, the giants now offer safe ports for workers seeking shelter from the gathering storm.”

The ingredients of that storm are: Rising interest rates leading investors to panic and sell their shares in growth-over-profits tech companies. A similar rout in cryptocurrency. Institutional investors freezing their later-stage investments in risky startups, leading many to pause efforts to raise more money, or accept lower valuations. At the same time, privacy changes by Apple and challenges to the world economy brought on by China’s Covid-19 lockdowns and the war in Ukraine are causing revenue growth at bellwethers like Meta and Snap to drop, further spooking investors.

5. WHERE DO U.S. PROPERTY VALUES GO FROM HERE?

In this two-part series, we take an in-depth look at how the shifting economic outlook and interest rate environment will impact the future trajectory of property values.

“As strong headwinds continue to collide with strong tailwinds, the macroeconomic environment is becoming increasingly complex for real estate investors to navigate. ”

In this first part, we review the historical relationship between the economy, inflation, interest rates and commercial real estate price movements.

Your success blesses others. I wish you a great and hugely impactful week!