Elevator pitch
Vacant space in commercial real estate
Good morning, prudent investors. This is your Stock Market Rundown for July 21st, 2023. Thanks for joining me. Let’s dig in:
TODAY’S TOP STORY: OFFICE SPACE🏢
Now that everybody is logging into Zoom rather than slogging in on the train, office vacancies are cresting to near 25% in cities like San Francisco and Chicago. And office real estate has gone from cash cow to squealing pig.
First the pandemic led to more working from home, spiking vacancies. Then higher rates across the board made the cost of carrying debt spike. Rents typically don’t rise fast enough to keep pace. Result? A squeeze worse than when the dryer shrinks your linen pants.
All this has office real estate stocks down bad from pre-panny highs. The big question: are knowledge workers going to be toiling at home in their pyjamas and bunny slippers forever? Or will fears of eroding corporate culture and sagging productivity lead bosses to drag them back to their cubicles?
While office may be in trouble, don’t write off commercial real estate in general. Industry experts see opportunities in “necessity-based” commercial real estate—think stuff like multifamily housing, industrial, or grocery-anchored retail. Suburban big-box strip malls with a Target, a Pottery Barn, and a Planet Fitness stay winning, thanks to soccer moms ‘n’ dads in minivans rolling through on a weekly basis.
Despite its challenges, experts think a commercial real estate crisis is unlikely due to a dearth of construction activity. Prices of labour, materials, and land are all up, which is keeping a lid on supply.
As real estate expert Tony Soprano used to say: “Buy land, AJ, ‘cause God ain’t making any more of it.”
SO WHAT ELSE IS GOING ON?
How's that carbon transition working out for ya? The price of oil has popped up past $80.
Momentum, mo’ problems: Cathie Wood’s infamous ARK Fund went from $30 billion in assets to now $9 billion. For future reference, the #1 best performing ETF in any given year usually doesn’t repeat the performance; act accordingly.
Tesla has launched production of the goofy-looking Cybertruck, an electric pickup truck, four years after the prototype debuted. This thing looks like a vehicle from an arcade video game in 1985. Anybody remember Battlezone?
Don’t fall in love with their photos: a study of Tinder users found that two-thirds were in relationships or married. Swiping left is too entertaining to give up even after you’re cuffed up, apparently.
Allbirds, maker of ugly shoes for tech geeks, has suffered from quality snafus, and the stock is down 95% since the IPO. Everybody makes fun of my Sketchers from the outlet mall, but they’ve held up for scores of heated pickleball games.
That’s it for this week, friends. Have yourselves a great weekend, and I look forward to seeing you Monday morning. Yours in capitalism, The Axe