Net Lease News

Net Lease News

Week of November 28th 2022

MARKET

FEDERAL RESERVE WATCH: WHAT’S GOING ON WITH THE BUBBLE

• Looks like Federal Reserve officials are only going to raise the policy rate of interest by 50 basis points in December.
• Reserve balances with commercial banks continue to decline, and the question becomes about how far the Fed will continue to oversee a reduction in these balances.
• M2 money stock growth is approaching zero and may soon move into negative territory, indicating that the fight against inflation is definitely progressing.

FED COULD BE PUSHED BY OVERHEATED WAGES TO HIGHER PEAK RATES

• Federal Reserve officials have enough worrisome inflation data to consider raising interest rates to a higher peak than investors expect and potentially follow the half-point hike they’ve signaled this month with the same again in February.
• Monthly wages rose at the strongest pace since January and US employment surged more than forecast last month. That will concern Fed Chairman Jerome Powell, who this week cautioned that slacker job-market conditions and less-lofty earnings growth were needed to cool an inflation rate near a 40-year high.
• Bets on a downshift to a half-point hike this month were intact after the employment report and investors saw the likelihood of the same again at the Fed’s Jan. 31-Feb. 1 meeting as roughly balanced. Pricing in futures markets shows rates peaking around 4.9% next year.

INDUSTRIAL

META BUYS 475-ACRE SITE TO EXPAND VIRGINIA DATA CENTER CAMPUS

• Meta is planning to expand a Virginia data center campus even as it cuts back other parts of its real estate footprint. 
• Meta purchased the 475-acre property from Henrico County’s development authority for $35.3M in October. The proposed development — referred to as Project Tropical in county filings — comes amid layoffs and office space cuts at Meta and across the tech industry. 
• For Meta, the Virginia project is just one of several data center developments the company has launched this year, with planned expansions of its facilities in Tennessee, Illinois, Alabama, Nebraska, Utah and Ohio. The company also announced the construction of new campuses in Idaho, Texas and Kansas.  

RETAIL

MACY’S CONVERTS 1M SF INTO MINI DISTRIBUTION CENTERS AS IT GEARS UP FOR HOLIDAY E-COMMERCE BATTLE

• Macy’s Chief Financial Officer Adrian Mitchell announced the conversion of almost 1M SF throughout 35 of its stores to mini distribution centers during an earnings call.
• Effectively managing inventory gives Macy’s the flexibility and liquidity to what consumers are buying at every customer touch point. As part of that effort, Macy’s will not be holding on to certain excess inventory to sell at a later date, hoping to avoid being saddled with out-of-season products.
• Macy’s also plans to announce fewer than 10 store closures in January, consistent with its decision last year to delay the closure of the full-line store base.

BEEKMAN-BACKED CONDADO TACOS TO OPEN UP TO 100 RESTAURANTS IN 3 YEARS

• Condado Tacos plans 12 new openings scheduled in the coming year, six of which are in new markets including St. Louis; Louisville, Kentucky; Knoxville, Tennessee; Greenville, South Carolina; and Birmingham, Alabama. The chain has 39 locations in 13 markets now.
• The company opened its first restaurant in Columbus, Ohio, in 2014. By 2019, it had 13 restaurants in Ohio, Indiana and Pennsylvania. Its supercharged expansion began after a major investment in the company in February 2020 by New York-based private equity firm The Beekman Group.
• Condado has a tremendous whitespace opportunity in existing and new markets given the concept’s broad demographic appeal, as well as the restaurants’ flexible real estate model and small footprint.

SHOPPERS FLOCK TO BRICK-AND-MORTAR RETAIL OVER THANKSGIVING WEEKEND

• A record 196.7 million Americans shopped over the Thanksgiving holiday weekend, with a resurgence of consumers returning to stores during that period despite inflationary headwinds.
• The total number of shoppers from Thanksgiving Day through Cyber Monday increased by nearly 17 million from 2021 — up about 9% from 179.8 million — and marked the highest figure since the National Retail Federation  first started tracking that data in 2017. 
• Retailers enjoyed a sizable spike in in-store shoppers. More than 122.7 million people flocked to brick-and-mortar stores over the weekend, up 17% from 2021.

MCDONALD’S TESTING NEW RESTAURANT FORMAT FOR ON-THE-GO CUSTOMERS

• In McDonald’s top six markets globally, digital has rocketed to more than a third of system-wide sales, fueled by north of 43 million active app customers. The chain’s U.S. digital business boasted more than 25 million in Q3 driven through MyMcDonald’s Rewards.
• McDonald’s is also on the verge of integrating a feature where guests can earn loyalty points and order and pay for delivery within the app—another expected boost on the heels of what CEO Chris Kempczinski called “one of our highest delivery sales quarters ever in the U.S.”
• McDonald’s on Thursday opened a new small-format test location in Fort Worth, Texas, designed for on-the-go guests. The location features an order-ahead lane, or a separate drive-thru lane where customers receive their orders via a food and beverage conveyor. McDonald’s said the option is ideal for users who place their order ahead of arrival through the app. They can then skip the traditional drive-thru line and receive food quickly and conveniently.