Northeast Real Estate Business

JAN-FEB 2016

Northeast Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Northeast United States.

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www.REBusinessOnline.com January/February 2016 • Volume 12, Issue 3 BEYOND THE DREAM Triple Five Corp. is developing American Dream adjacent to The Meadowlands. The project represents the future of retail, entertainment and attractions. By Randall Shearin T he consensus among lenders is that the Federal Reserve's move in December 2015 to boost the federal funds rate a quarter percent- age point — the frst such increase in nearly a decade — affrms the U.S. economy is on a healthy path. The employment data supports that analysis. Total nonfarm payroll em- ployment rose by 292,000 in December, according to the U.S. Bureau of Labor Statistics, and employment gains in October and November were revised upward by a combined 50,000. Over the fnal three months of 2015, job gains averaged 284,000 per month, a strong showing that indicates em- ployer confdence is growing. But the rate hike by the Fed also rep- resents an important turning point for the commercial real estate industry, says Bob Bach, director of research for the Americas at Newmark Grubb Knight Frank. "For real estate, this marks the likely end of cap rate compression and por- tends a gradual rise in interest rates on mortgage and construction loans, eventually putting upward pressure on cap rates," says the veteran re- searcher. The federal funds rate is the rate charged for overnight loans between banks. It is one of the most infuen- tial interest rates in the U.S. economy, since it affects monetary and fnancial conditions, which in turn have a bear- ing on key aspects of the broad econ- omy including employment, growth and infation. The planned slow pace of the Fed's tightening monetary policy — pos- sibly four quarter-point increases in each of the next three years — should help commercial real estate acclimate to this turning point in the cycle, Bach believes. "Strong [real estate] fundamentals will push rents and net operating in- comes higher as the economy contin- ues to expand, mitigating the impact that rising cap rates will have on prop- erty values," explains Bach. Warren Higgins, head of mortgage banking at Berkadia, says the rate hike means "more creativity and hard work will come into play" for commercial real estate investors to maintain proft margins. "As long as interest rate moves do not outpace rent growth and net op- erating income growth, commercial real estate will be steady," says Brian see LENDING page 28 EXPECT ANOTHER YEAR OF ROBUST LENDING Strong real estate fundamentals will offset upward pressure on interest rates and cap rates in 2016. By Brian A. Lee S everal times over the course of the shopping center industry's history, Triple Five Corpora- tion has made the seemingly impos- sible possible. The company is best known as the developer of West Ed- monton Mall in Canada and The Mall of America in Minnesota. Both are among the largest shopping environ- ments in the world, and both created models that didn't exist before in the industry. Now, Triple Five is develop- ing American Dream, a massive retail and entertainment complex just out- side New York City in New Jersey's Meadowlands project that goes well beyond what the company has ever done before. Triple Five aims to create an ex- see AMERICAN DREAM page 26 American Dream will feature innovative design, one-of-a-kind retail offerings, and unparalleled entertainment attractions. Empire Outlets, Creating a Tourist Mecca page 24 INSIDE THIS ISSUE It's a Game of Musical Chairs for Boston's Corporate Tenants page 18 Philadelphia's Appeal for Employers: Demographic Shifts, New Urbanism page 22

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