Call it a “silent killer”, but there is a big threat coming to US malls that many don’t see coming. While the big bout of retail bankruptcies in 2017 hit the industry hard, a less headline-grabbing, but more widespread issue might cause bigger issues in 2018. That issue is that smaller mall tenants are likely to simply not renew their leases. Smaller operators between the big anchor stores actually generate more revenue for malls, and a decrease in tenancy would be a big blow to mall revenue. Smaller operators are actually better indicators of retail health because their lease terms keep them on the lookout for greener pastures.
FINSUM: Mall REITs could be in for a rough time here. While little companies won’t get much press, this pending increase in vacancy rates could hit malls hard.
The last couple of years have seen a huge surge in the legal pot industry. More and more major states have made marijuana legal, which in turn has sparked a flurry of business to create a legal pot industry. However, doom and gloom may be about to settle into the young area as Jeff Sessions, Trump’s Attorney General, has now rescinded the Obama era policy that limited legal enforcement of federal marijuana laws in states where it was legal. The news hit the sector hard, with one of the main pot stock indexes down as much as 24% yesterday.
FINSUM: It is going to be hard for the federal government to enforce any national law when there is primarily only local law enforcement, but this could still cause some major disruptions to the young industry.
When people think of real estate investing, their most likely areas of focus is on homes, apartments, or various types of commercial buildings. But Barron’s has run a piece chronicling a very well-performing fund that takes an entirely different approach—investing in property where tenants cannot move, at all. To be clear, this means things like data centers, hydroelectric dams, cellphone towers, and lab space. Large casinos also have this immovable characteristic because of the investment it takes to create them. This type of investing approach has yielded very strong returns over the last few years.
FINSUM: Buying into properties where tenants can’t move creates a very strong defense against economic downturn. This is definitely a good hedge to use against many asset classes and can be achieved using REITs.
One of the bright spots in the post-Crisis era has been the collectibles market. Everything from antique cars to high end art has surged in value since the Crisis, making collectibles one of the better returning asset classes. However, at least for the art market, that appears to have changed, as 2016 saw sales shrink 11% to their lowest point since the recession. 2016’s poor performance follows a down year in 2015 as well, when sales slipped 7%. The combined losses have now wiped out all the gains seen in 2013 and 2014. 2016 was particularly poor for auction houses.
FINSUM: Hard to say exactly what slowed the sector down as it had been doing so well. One interesting factor—the declines directly coincide with the bear market in oil.
The real estate investment industry is having a problem. Investors are very eager to put money to work in the asset class, but managers are having trouble finding suitable investments. At the end of 2012, property funds had $136 bn to invest, now that figure is $237 bn. Low rates have driven interest in the sector, but the issue is that there is simply not much for sale, which means investors have a great deal of dry powder yet to be invested. Owners have easy bank financing and low debt levels, which leave them free to hold onto properties until they can get a higher return later.
FINSUM: As this piece rightly points out, a lot of people are investing for yield and not looking at the fundamentals. The market appears to be getting overheated, at least on the commercial end.
Source: Wall Street Journal
The renewables industry, and especially solar, has just hit a major milestone. For the first time in history, solar energy is now the cheapest form of new electricity generation. It is beating out conventional source like coal and natural gas, but also wind energy. The low cost of solar energy is thanks to years of quick advances in technology which made solar panels much cheaper to buy. In 2010, solar energy cost almost $6m per megawatt, but this year that cost is down to just $1.65m. In some cases, solar energy is now half the price of coal.
FINSUM: Whether or not you are worried about the environment, the advancement of solar energy is good news, because it is lowering energy costs across the board.