NewsPour 9.4.23
This week’s newsletter headlines: Artificial Intelligence Improves Office Property Occupancy; Home Sales Rise Unexpectedly; Disasters Driving Property Insurance Costs Higher.
AI Improves Office Occupancy
For the office property sector in the second quarter vacancy fell to 18.8% and rent grew by 0.2%. Helping drive this improvement Artificial intelligence (AI) investment rose in the tech sector. Nearly half of the AI job postings in the past year were in San Francisco, San Jose, New York, Los Angeles, Boston, and Seattle. According to PitchBook, venture capitalists have been investing heavily in AI start-ups with over $11 billion in May alone. Established companies are also investing in new AI hires. A recent CNBC Technology Executive Council survey revealed that 63% of companies are accelerating their AI investments. Hear a summary discussion on our YouTube video here.
Home Sales Rise Unexpectedly
US pending home sales rose in July by 0.9%, despite elevated prices and rising mortgage rates. Pending sales rose in the South, up 2% from June; and the West, which was up 6.2% from June. Pending home sales dropped in the Northeast, down 5.8% from June; and in the Midwest, down 0.4%. The West region experienced a meaningful price decline in the past year and buyers are quickly returning. Unlike the market for new homes, pending home sales continue to lag behind year-ago levels. Low housing inventory is hampering sales nationwide. Few homeowners with ultra-low mortgage rates of 3% or 4% are willing to sell their home and buy another one at 7%. Hear a summary discussion on our YouTube video here.
Disasters Driving Higher Property Insurance
Insurance costs for commercial real estate is rising, outpacing rent increases and general inflation. Properties in high-risk weather areas, particularly those at risk of hurricanes, face the highest insurance rates. Growth in the cost of insurance for multifamily properties, for example, has tracked closely with the frequency of $1 billion natural disasters in the U.S. For retail properties in Miami, a city at risk of hurricanes; Moody’s shows that rent increased at an average rate of 1.4% between 2017 and 2022; Cost of insurance increased by 7.5%. In Denver, where wildfires are a risk, the cost of retail rent increased by 0.4% annually in the same time frame; the cost of insurance increased by 9%. Hear a summary discussion on our YouTube video here.
SelectFinCap Closes Purchase of Multifamily Property
In other recent news Select Financial Capital completed the acquisition of the 32 unit property known as the Nolia Multifamily Property. This prime real estate is strategically located on North Street in Summerville, South Carolina outside of Charleston. The property boasts renovated units requiring little capital expenditures, a growing market, and rising rental rates, making it a promising addition to the company’s diversified portfolio for its investors.