Net Lease News

Net Lease News

December 13 – December 19, 2022 

MARKET

RECESSION RISKS MOUNT, UNEMPLOYMENT EASES, MORTGAGE RATES DECLINE

• Continued high interest rates and tense geopolitics are raising the chances of a global recession in 2023, even with a recent easing of U.S. inflation, according to reports during the past week from prominent analysts.
• November’s unemployment rates dropped from a year earlier in 36 states and the District of Columbia, reflecting national jobless rates that remain at 50-year lows, the Labor Department reported Friday. The government reported 11 states had little or no change and three had unemployment increases from November 2021. Compared with October, November’s jobless rates held stable in 35 states, rose in 12 states and dropped in three states and the District of Columbia.
• The government loan-backing agency said 30-year, fixed-rate mortgages averaged 6.31% for the week ending Dec. 15, down from 6.33% in the prior week but much higher than the year-earlier figure of 3.12%.

FED DOWNSHIFTS RATE HIKES, BUT NO PIVOT IN SIGHT

• After deploying a brutal path of massive rate hikes over the past six months, resulting in an increase of 375 basis points this year alone, the Federal Reserve’s policy setting committee voted this week to slow the rate of increase for its target rate.
• The committee voted unanimously to raise it by 50 basis points, or half of a percentage point, a slowdown from its past four hikes of 75 basis points. This was the seventh rate increase in the Fed’s front-loaded tightening cycle and the first time in five meetings that it chose a smaller rate hike.
• The decision sets the overnight lending target rate for banks to between 4.25% and 4.50%, the highest level since December 2007.

INFLATION IS FINALLY RUNNING OUT OF STEAM

• Inflation slowed in November as consumer prices grew by a mere 0.1%, according to the Bureau of Labor Statistics, slower than expected. As we often remind readers, a single month doesn’t make a trend, but taken together, prices have risen by an annualized rate of just 2.5% over the past five months, which is rather close to the desired pace of inflation targeted by the Federal Reserve.
• Moreover, while inflation is 7.1% higher than a year ago, much of that growth came from December 2021 to March 2022 — so the year-over-year figures will likely moderate over the next few months, barring any unexpected event.

INDUSTRIAL

REDWOOD MATERIALS PLANS $3.5B BATTERY MATERIALS FACILITY IN SOUTH CAROLINA

• Redwood Materials is planning to develop a 600-acre battery materials and recycling facility in South Carolina. It will eventually employ about 1,500 workers.
• The startup, founded by former Tesla co-founder J.B. Straubel, agreed to spend at least $3.5B in the state over the next decade, though it isn’t clear what incentives it was offered to pick the South Carolina location.
• The demand for electric vehicle batteries is expected to balloon in the coming years as U.S. drivers turn toward EVs. Electronic vehicles might total nearly 30% of U.S. auto sales by 2030, according to EV data specialist EVAdoption.

RETAIL

OHM FITNESS EMBRACES ELECTRIC STIMULATION TO DUPLICATE INVESTORS’ SUCCESS WITH OTHER CHAINS

• A franchising veteran who learned from the now-ubiquitous Orangetheory Fitness, European Wax Center and Massage Envy chains has launched a new venture: fitness studios that employ electrical muscle stimulation, or EMS.
• OHM Fitness, based in Scottsdale, Arizona, has sold the rights for franchise territories for Arizona, New Jersey, Florida and Washington, D.C., and has other deals in the works. The first flagship club, which is in Scottsdale, opened this summer. In New Jersey, there are plans to open 30 OHM centers over the next three years.
• OHM has developed tight wireless EMS bodysuits that allow patrons to experience an intense two-hour workout in a 25-minute session with little wear and tear on muscles and joints.

AMAZON MAY BE GETTING INTO THE MOVIE THEATER BUSINESS

• In Hollywood, New York, Georgia and places in between, big-ticket soundstage projects have been announced on what seems like a weekly basis in response to the insatiable demand from streaming services like Amazon and Netflix for new film and TV content.
• Now comes news that Amazon has opened its first physical movie theater—The Culver Theater, in the California city of the same name—a month after announcing that it would spend $1B making films earmarked for theatrical release in real movie theaters.

DOLLAR GENERAL’S POPSHELF TARGETS INFLATION-WEARY SUBURBANITES WITH HUNDREDS OF NEW STORES

• Dollar General is continuing its plans for retail domination with the expansion of pOpshelf, the brand’s attempt to sell fun and frivolous items amid high inflation.
• Dollar General has announced plans to open 1,000 pOpshelf stores within the next three years, with an eventual goal of operating 3,000 locations nationwide.The pOpshelf concept, which targets suburban women in households with annual incomes of between $50K and $120K, got its start in 2020 when two stores opened in Dollar General’s home base of Tennessee. As of the end of this year, that number is expected to swell to more than 200, including 25 in Texas alone, as the company moves aggressively to court suburban shoppers.
• Stores like Walmart and Target report shoppers are spending less on discretionary items and more on necessities as stagnant income and high inflation take a toll. POpshelf sells about 95% of items for $5 or less, in hopes of giving suburbanites the opportunity to buy what they want rather than just what they need.