Rocket Fuel Newsletter – 08/05/2024

Did you know that architecture and town planning were once Olympic events? From 1912 to 1948, artists competed for medals alongside athletes. The Olympic art categories included architecture, literature, music, painting and sculpture. Imagine winning a gold medal for designing a sports venue!

In this edition: the Fed’s latest rate decision, pets continue to feel the love, and a look at the current commercial real estate market.

Dive into the surprising history of creative Olympic competitions!

Fuel Up! 🚀

The Fed Decides

On Wednesday, the Fed announced their decision to hold interest rates steady at 5.3%. However, Fed Chair Jerome Powell indicated that easing inflation and a cooling job market could open the door for a rate cut upon their next meeting on September 18.

Read the Fed’s full statement here.

Inflation Pinches Americans, But Pets Are Still Pampered

Despite inflation, many Americans are unwilling to cut back on spending for their beloved pets. Some Americans even drive an hour and a half to keep their dogs’ preferred vet. Pet costs have surged, but the love for furry family members has kept many wallets open. 🐶🐾

Read more stories on pet devotion in our economic climate.

Why Birth Order May Affect Your Career

Are you the oldest, youngest or an only child? New research reveals that firstborns often climb the career ladder faster and earn more, thanks to parental attention (or giving their competition more noogies). But don’t worry! Success is still in the cards for everyone. You younger siblings can still catch up by taking more risks and switching jobs.

Dive into sibling rivalry in career success.

What Is Commercial Real Estate (CRE)?

According to Investopedia, commercial real estate is defined as a property used for business-related purposes or to provide workspace rather than living space. Most often, commercial real estate is leased by tenants to conduct income-generating activities. This broad category of real estate can include everything from a single storefront to a massive factory or a warehouse.

The commercial real estate market has been a volatile place since the pandemic and since the Federal Reserve started to increase interest rates in 2022. One of the primary drivers of this trend has been a shift in demand for commercial space, from the prevalence of remote and hybrid work, pushing down demand for office spaces despite a strong labor market. As a result, many commercial property owners, companies and banks have made or will have to make some difficult decisions due to changing demand and decreased values.

Additionally, nearly 1 trillion commercial real estate (CRE) loans will come due in the next 2 years, For instance:

10% loss on all CRE loans would leave nearly 100 banks under capitalized
20% loss on all CRE loans would leave nearly 900 banks under capitalized

This is rare but not impossible, and the excess risk on small and mid-sized banks could lead to bank failures, forcing the Fed to help them with liquidity or risk a significant financial downturn. On top of this, the Fed has voiced that the risks on the volatile CRE market will be prolonged as more leases come due and demand is lower than when the leases began.

It isn’t all bad though!

Mixed-use spaces – incorporating retail and industrial spaces in the same building – have seen some great upsides. Simultaneously, builders and investors have slowly been buying distressed properties recently at lower prices. Some are seeing this as an indication that the market could be bottoming out soon and heading back to a more normal state.

Why take a mixed-use approach?

Aside from qualitative advantages like promoting more efficient use of resources and creating a more fluid environment for work and leisure, the economic impact cannot be understated.

The pandemic forced companies across the globe to institute hybrid or completely remote work environments, which kept workers at home. As a result, office-heavy communities in cities like San Francisco and New York saw large out-migration – for example, the Financial District had an out-migration rate 2.2 times higher than the Lower East Side due to the Financial District’s relative lack of housing options.

The short of it is: where people can both live and work – both on a macro city/neighborhood level and on a micro building level – the greater the flexibility in how the space is used.

One successful example of a property that has leaned into the new CRE market is the Book Tower in downtown Detroit. When it opened in 1926, it was the tallest building in Detroit. However, from the 1960s until it was bought by Bedrock in 2016, the building fell into severe disrepair both inside and outside.

With a plan to use the building for restaurants, bars, office space, apartments and more, the Book Tower was cleaned up and renovated over the last several years ahead of its grand reopening in 2023.

While the future of the commercial real estate market remains uncertain, those willing to diversify and adapt are likely to find new opportunities in the changing market.

Rocket Companies was well-represented at the Inman Connect conference in Las Vegas last week, headlined by General Manager Alpa Lally (second from left) on a panel discussing the most influential tech trends in 2024 and beyond. Thanks to everyone who came by to check out the Rocket Room!

There were four lightning-fast times on last week’s puzzle! John F (21 seconds), K (27), and Paul L (28) posted solid times, but Mike C’s time of 19 seconds earned the top spot for last week.

This week’s puzzle gets 2 Rockets out of 5.

Click here to solve!