Volkswagen Group of America, Inc., the North American subsidiary of German automaker Volkswagen, has signed a 20-year lease agreement for a new logistics facility at Port Freeport, Texas. The new hub will enable Volkswagen to import approximately 140,000 vehicles per year from its production hubs in Mexico, as well as imports from Europe, according to a company press release. The facility at Port Freeport is intended to serve nearly one-third of Volkswagen’s U.S. dealer network of over one thousand dealerships. Volkswagen and developer KDC aim to break ground on the new location later this year and expect for the facility to be operational in early 2024.
Manhattan’s Return to the Office
According to a survey of major Manhattan office employers conducted by the Partnership for New York City, on an average weekday (as of September 2022), forty-nine percent of Manhattan office workers are in the workplace. Nine percent of Manhattan office workers are in the office full time (five days a week); twelve percent are in four days per week; thirty-seven percent are in three days per week; fifteen percent are in two days per week; eleven percent are in one day per week; and sixteen percent of Manhattan office workers are fully remote.
The real estate industry has the highest average daily attendance (82%) as of mid-September, followed by law (61%) and financial services (56%) firms, according to the survey.
UK Mortgage Rates
The current Bank of England base interest rate—the rate that largely determines mortgage interest rates—is 2.25 percent. This week, the average interest rates for two and five-year fixed rate mortgages topped six percent for the first time in over a decade, according to Forbes. The Bank of England will reveal its latest decision on the base interest rate on November 3rd.
Office Sector in Q3–2022
In Q3–2022, about 1.34 million more square feet of office space was vacant and placed on the market than were leased, according to the National Association of Realtors (“NAR”). In this weakest of all commercial real estate sectors, the vacancy rate increased from 12.3 percent in Q2–2022 to 12.4 percent in Q3–2022, according to the report.
In Manhattan, the office availability rate for Q3–2022 was 16.4 percent (26 percent in the Financial District), compared to 10 percent at the end of 2019, according to Commercial Observer (citing research from Colliers).
A Robust VFOIA
Open and transparent government can benefit Virginia’s people and commerce. An effort is underway (U.S. Sup. Ct. Dkt. No. 22-308) aimed at safeguarding the Virginia Freedom of Information Act (“VFOIA”).
According to the Reporters Committee for Freedom of the Press, the stated purpose of VFOIA is to secure to the Commonwealth’s citizens “ready access to public records” and “free entry to meetings of public bodies” (quoting Va. Code Ann. § 2.2-3700B). Bob Lewis, writing in the Virginia Mercury, states that “[w]ithout a robust FOIA, small-scale wrongdoing gains the dark, airless recesses necessary to metastasize unchecked into criminal abuse.”
The ACLU of Virginia states that “[g]overnment secrecy is a threat to basic democratic principles … [y]et today, much of our government’s business is conducted in secret.” It believes that the Commonwealth’s “government bodies should default in favor of transparency in all public actions whenever and to the greatest extent possible” and points out that “[t]he Virginia Freedom of Information Act states that the Act ‘shall be liberally construed to promote an increased awareness by all persons of governmental activities and afford every opportunity to citizens to witness the operations of government.’”
Sarah Vogelsong, also writing in the Virginia Mercury, deplores that “[i]n Virginia, more often than not, the government doesn’t actually think you have the right to know what it’s doing.”
The Inflation Reduction Act of 2022 and Its Impact on Inflation
The following is from a Congressional Budget Office (“CBO”) letter dated August 4, 2022:
“In calendar year 2022, enacting the bill would have a negligible effect on inflation, in CBO’s assessment. In calendar year 2023, inflation would probably be between 0.1 percentage point lower and 0.1 percentage point higher under the bill than it would be under current law, CBO estimates.” … “Enacting the bill would affect economic activity and inflation beyond 2023. CBO has not evaluated those effects.”
Construction Starts – June 2022
Total U.S. construction starts fell by five percent in June to a seasonally adjusted annual rate of $932.3 billion, with nonresidential building starts declining 14 percent and residential starts declining six percent, according to Dodge Construction Network.
Year-to-date, total construction was five percent higher in the first six months of 2022 compared to the same period in 2021 and for the 12 months ending in June 2022, total construction starts were seven percent above the twelve-month period ending June 2021, according to the report.
North Texas Tops List for CRE Sales During H1–2022
The DFW Metroplex ranked as the number one U.S. market in CRE sales during H1–2022, according to The Real Deal (citing data from MSCI). DFW metroplex sales totaled $22.9 billion during H1–2022 followed by Los Angeles ($15.5 billion). Nationwide, a total of $375.8 billion in CRE investment was recorded – a 38 percent increase from the first half of 2021, according to the report.
Mexico’s Housing Market in 2022
Mexico’s nationwide house price index rose by 0.41 percent in Q1–2022 from a year earlier, according to Global Property Guide. For comparison, the year-over-year growth in Q1–2021 was 2.5 percent.
Between 2016 and 2021, real house prices in Mexico increased by an annual average of 2.75 percent, according to the report, and a typical city-center Mexico City apartment currently sells for about $279/sf with rent yields between 4.9 percent to 5.4 percent.
CRE Values Decline in June
CRE analytics firm Green Street reports that its Commercial Property Price Index declined by 3.7 percent in June. Among its sector-level indexes, “Strip Retail” and “Net Lease” showed the biggest declines (-7 percent) over the past month, whereas the “Health Care” index declined by only two percent. Notably, the sector-level indexes indicate significant price appreciation in the “Industrial” (+42 percent) and “Self-Storage” (+58 percent) indexes from pre-COVID values.
According to Green Street, its Commercial Property Price Index is “a time series of unleveraged U.S. commercial property values that captures the prices at which commercial real estate transactions are currently being negotiated and contracted.”