YardDog Market Watch - Nov 19, 2024

THIS WEEK’S TOP 3
Stats to Know

1) Inflation ticked up slightly at a 2.6% increase, but overall the CPI-U report was in-line with market expectations.

• The Increase: Over the last 12 months, all items index increased 2.6% before seasonal adjustment. 

• Inflation Still Higher than Pre-Pandemic Levels: While inflation has slowed from its peak in 2022, it remains higher than pre-pandemic levels.

• Potential Impact on Rate Cuts: The likelihood of a December interest rate cut by the Fed, while still anticipated by investors, depends on more economic data. Most brokers still expect that the last FOMC meeting of 2024 will reveal a 25bps Fed cut on December 18th.

  

  https://www.nytimes.com/live/2024/11/13/business/cpi-inflation-fed

2) Some Institutions Plan Lower Commercial Real Estate (CRE) Allocations by around 10% for 2025

• Reduction in CRE Allocation for 2025: The reduction is primarily driven by negative returns recorded in 2023, as many portfolios reassess risk levels according to GlobeSt.

• Pressure from Public Equities: Real estate allocations have been historically high but are now under pressure due to recent outperformance in public equities, making CRE investments comparatively less attractive in some institutional portfolios.

• Interest Rates and Future Outlook: Future returns and allocation decisions for CRE investments may be heavily influenced by shifts in global interest rates, presenting a mixed outlook for institutional strategies in 2025.

3) 40% of all U.S. container traffic travels through the Panama Canal every year, and it’s experiencing a rebound.

• Transit Volumes Rebound: Despite a temporary slowdown in October due to the International Longshoremen’s Association strike on U.S. East and Gulf Coasts, vessel transits at the Panama Canal rebounded, with volumes recovering in the latter half of the month.

• The Canal Remains Crucial for U.S. Trade: 73% of its traffic tied to U.S. imports and exports. It will be interesting to see how or if this will change with the new administration.

• Increased Flow Impacts Demand for Outdoor Storage: As vessel transits through the Panama Canal increase, with larger ships and more cargo containers being handled, US ports in areas like Houston, New Orleans, Savannah, and New York/New Jersey could experience increase volume and need for IOS.

  

CHART OF THE WEEK 
The Real Estate Roundtable Sentiment Index

The most recent Real Estate Roundtable Sentiment Index looks optimistic for current conditions as well as assumed future conditions. Compared to one year ago, sentiment of current conditions are up by 37 points, perceptions of future conditions are up by 20 points, and overall conditions are up by 29 points — access the full report here.

NOTABLE QUOTES
They said…

“The IOS market is continuously growing - supply is limited and recent surges of institutional capital into the space have made it an ideal time to invest in developing these assets.”
- David Christel, Director of Operations at ARCO

Another rate cut in December is “certainly on the table, but it's not a done deal. There's more data that we will see between now and December, and we'll have to continue to weigh what makes sense."
- Susan Collins, Boston Fed President

RUMOR HAS IT
We’ve heard…

• Trucking groups continue to face hardships even as the freight recession is supposedly coming to an end. Rumor has it that we will see more trucking bankruptcies in the coming months, which could possibly mean tenant defaults and IOS buying opportunities…

Make sure you’re subscribed to the newsletter where we’ll cover these stories and more in future editions!

Please note that these are just rumors we’ve heard in the market. We are not representing any of these claims as true or false, and will cover them in greater detail when more sources and information is available.