Tour activity is picking up, especially south of market. The flight to quality persists. Short term, plug n play options remain the belle of the ball. Tire kicking continues to dominate the market, as we are eliciting more tours but conversion to LOIs is still light in the office sector. Lighter still, are actual comps, as our Tenants in the Market sheets fill up. Well located, suburban product continues to garner significant attention: https://news.theregistrysf.com/six-new-leases-totaling-60000-sqft-signed-at-mill-valleys-shoreline-office-center%EF%BF%BC/?utm_source=newsletter&utm_medium=email&utm_campaign=american_campus_communities_announces_13_billion_transaction_with_blackstone_funds&utm_term=2022-04-19
Union Square is beginning to look life it’s old self again — minus one crucial aspect. Businesses. It is shocking what the confluence of COVID, public safety risks and online shopping adoption has done to the shopping district/tourist hotspot over the past half decade. A slow trickle of tourism is coming back and police presence is lending a hand in making merchants and shoppers feel secure once more, but the blocks between Stockton and O’Farrell and Powell street from O’Farrell to Geary are essentially completely vacant. I reported last week that “the buzz” of the city is returning, but I fear that this stretch of Union Square is in for a slower recovery given the uncertainty in global markets and supply chains.
Another big CPI print was reported (8.5%!), but somehow wasn’t headline news. There was also a buried report about Home Equity — since 2020 Americans have taken $427 bn in home equity lines of credit. That almost half a trillion, plus the stimulus checks, plus unemployment un-employment benefits could be factoring into the numbers we are seeing from inflation. Not so much the great resignation as it seems to be the great live off of my savings for a few more months. That’s a ton of capital sloshing around chasing limited products/services. The markets will need time to absorb it prior to people returning to work in full capacity. Retail investors continue to play chicken with the Fed and the only blunt force instrument the Fed has is to raise rates.
Multifamily rental sales pricing is up approximately 12% throughout San Francisco since the end of Q4, indicating folks are returning to the city. Expect this to slow down with rate raises. In the graphic below STRs in mountain destinations have seen significant declines. Indicating people preparing to be in-person more, even if they have yet set foot in their offices. Wages are going up and the used car market has cooled over the last few weeks.
Tesla drastically outperformed the market’s expectations in Q1 -
• Earnings: $3.22/share (non-GAAP) vs. $2.30/share exp
• Revenue: $18.756B vs. $18.1B exp
• Automotive Gross Margin: 32.9% (vs 27.6% exp)
• $3.3B GAAP net income
This is despite zero dollars in advertising.
Worldwide, it is looking like there is a great and greater likelihood of a few quarters of slower growth. Europe will be the canary in the coal mine. Watch out for how China may be on the offensive with regards to taking advantage of food scarcity in countries such as Sri Lanka, Ethiopia, Indonesia, etc. that rely heavily upon Russian/Ukrainian wheat exports.
