The final days of the Joe Biden presidency are turning out to be impactful ones for CRE. 

A new rule issued by the Federal Trade Commission yesterday will reshape the way hotel and short-term rental companies list their pricing.

A ban on “junk fees” won’t affect what hotels can charge for things like cleaning and amenities — resort or convenience fees are still legal — but it does require that hotels, vacation homes and live event venues list all-in pricing clearly and upfront. The FTC said the new rule, which will take effect in late Q1 or early Q2, will save consumers 53 million hours a year of “wasted time spent searching for the total price,” which it said is equivalent to $11B of … something. (It doesn’t say how. Lost income? ¯\_(ツ)_/¯.) 

The administration has taken aim at similar rules for rental housing, saying fees for things like trash collection and mail sorting should be clearly marked upfront in the rent price, but that was excluded from this rule. Still, in September, Invitation Homes settled an FTC complaint alleging junk fees and deceptive leasing pricing (among other things) with a $48M payout.

And in related news, the White House issued a report yesterday that said renters spent at least an extra $3.8B in 2023 because of RealPage’s pricing algorithm. It said the average renter paid $70 more per month when their landlord used RealPage’s AI Revenue Management program. 

RealPage said last week that the DOJ’s criminal investigation into it is closed, but the federal government’s civil lawsuit against the firm is ongoing.

— Mark F. Bonner, Jay Rickey, Kayla Carmicheal and Catie Dixon

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On Our Radar

• You’ll get a rate cut today. Will this be the last one for a while? The economy at the intersection of politics is a persnickety thing. While a rate cut is almost absolutely guaranteed today (CME FedWatch has 25 bps at 98.6%), when the next one might come is a jump ball. Inflation is nearing the Fed's 2% target and the job market remains steady, but the next time the FOMC meets, the U.S. will have a new president and a new political reality with its own economic risks, particularly from proposed tariffs and mass deportations. Wall Street anticipates much slower rate reductions in 2025.

• Over 66% of global real estate markets are in the “buy phase” — the highest since 2016. Hines’ 2025 Global Investment Outlook says it resembles past postdownturn periods like 2010 and the mid-1990s. Europe leads with 75% of markets in “early buy,” “buy” or “strong buy” zones, driven by considerable repricing. North America trails slightly, with 60% in early buy zones and 19% in the late buy phase, supported by potent industrial and retail fundamentals. Unsurprisingly, Asia presents a mixed outlook, with pronounced corrections in China and Hong Kong, while Japan sees rent-driven growth potential in residential and industrial sectors.

• Mandating RTO? Get ready for slower growth and higher turnover. That’s according to a new study from Revelio Labs. Since mid-2022, firms with flexible work policies grew 1.6%, compared to 1% for RTO-mandated companies. Studies show RTO increases employee dissatisfaction, particularly among senior and skilled workers, while failing to improve financial performance. Pushback against RTO includes claims of union-busting and attrition strategies. Despite this, some executives continue to defend RTO, citing culture and collaboration benefits, and a wave of major companies cracked down on remote work this year.

• Correction to yesterday’s First Draft: In our lead story in Tuesday’s edition about the waning days of extend-and-pretend, we accidentally misattributed a quote from Matt Reidy at Moody’s Analytics to Trepp’s Rachel Szymanski. Sorry!

So, Tell Us The Future 

Credit has been and continues to be the flavor of 2024. It’s been the main focus, and it will be interesting to see when that starts transitioning back to equity. It feels like we’re getting close to that point. People are going to start realizing they’ve had enough exposure to credit, the basis of properties are reaching their lowest level, below replacement cost, and it’s time to start looking at equity again. In my opinion that transition will start to occur in the first half of 2025.

Martin Nussbaum
Co-Founder and Principal, Slate Property Group
New York City

What's your bold 2025 prediction for real estate? The First Draft team wants to hear from the biggest players in CRE. Give us any and all takes in 150 or fewer words, and they may be published in future editions: firstdraft@bisnow.com. 

Today's Deep Dive:AI Is Coming For Delinquent Tenants

Property managers don’t like hounding tenants about unpaid bills. 

But as apartment owners face issues with high rent delinquencies, they need someone to do it. So some of the nation’s largest landlords have decided to turn to artificial intelligence. 

In more than 1 million apartments across the U.S., building managers are using EliseAI’s artificial intelligence chatbot to push delinquent tenants to pay their rent — and in some cases to draft eviction notices. 

These practices have helped boost cash flow for apartment owners, but they have also raised some ethical and legal red flags.

Read the full story here.

This Morning’s News

HOTELS — Will Layoffs, Pay Cuts, Boost Shareholder Value For Ashford? (Bisnow): The Dallas-based hotel REIT, staring down major debt maturities, announced the “GRO AHT” initiative to improve its revenue and shareholder value. The plan: layoffs, reduced executive compensation, a “pricing audit” of its food and beverage income and finding new revenue streams. The goal: a $50M boost to EBITDA. Read more here.

OFFICE — Is Office (Once Again) Bracing For A Reckoning? (Bloomberg): Every building sale or foreclosure gives the market another data point on the true market value of properties. Putting trouble off until 2025 didn’t fix the industry's underlying issues. Read more here.

CONSTRUCTION — Builder Confidence Stable With Optimism (NAHB): Builder confidence remained steady to end the year; builders expressed increased optimism for higher sales expectations in the next months. Read more here.

HOUSING — Single-Family Permits Surge Nearly 10% (NAHB): Single-family permits issued nationwide in the first 10 months of 2024 reached 846,446, an increase of 9.4% from the October 2023 level of 773,526. Read more here.

AI — What Wood Would An AI-Powered Business Use For Power? (WSJ): Drax is scouting sites in the Southern Pine Belt to build electricity generators fueled by wood chips, aiming to support energy-intensive AI applications. Read more here.

LEGAL — Architect Charged In 7th Murder Case (AP): Rex Heuermann, the Manhattan architect linked to the Gilgo Beach murders, faces charges in the death of a seventh woman  as prosecutors continue to unravel the case. Read more here.

LEGAL — Investor Sentenced To 5 Years In Freddie Mac Case (Bisnow): Apex Equity Group’s Aron Puretz was given the maximum possible sentence and ordered to pay $22M in restitution after pleading guilty to a $55M mortgage fraud scheme that included forged financial statements and purchase contracts. Read more here.

REITs — U.S. REIT Short Interest Rises 17 BPS (Seeking Alpha): Average short interest in U.S. REITs increased by 17 bps last month. Chicago-based REIT Ventas had the largest rise, up 3.2% to 5.1% of shares outstanding. Read more here.

MULTIFAMILY — Housing Starts Hit 4-Month Low (Bloomberg): U.S. housing starts fell to a four-month low in November, driven by a decline in multifamily projects. Read more here.

FINANCE — Hines Global Income Trust Sees NAV Decline To $9.91 (The Di Wire): Hines Global Income Trust reported a dip in its net asset value, ending at $9.91 per share in November after three straight months at $10.02. Read more here.

HEALTHCARE — Hospitals Go Back To The Drawing Board (Bisnow): The pandemic forced hospitals to realize they weren’t well-equipped to meet patients’ needs. Many of them went back to the drawing board to come up with an immediate action plan instead of focusing on long-term goals. Five years later, hospitals are ready to focus on those abandoned long-term strategies again. Read more here.

INVESTMENT — Continental Properties Closes $210M Fund (Continental): Continental Properties has secured $210M for its third development fund. The Wisconsin-based company says the fund will develop 14-16 suburban apartment properties with a projected aggregate stabilized value exceeding $1B. Read more here.

HOTELS — Blackstone Explores Sale Of Hawaii Resort (Bloomberg): Blackstone is looking to sell the Grand Wailea Resort, which it acquired in 2018 for $1.1B. The 40-acre property includes about 845 rooms and suites and was renovated last year. Read more here.

REITs — Retail REITs Optimistic After Strong Holiday Sales (Nareit): Retail REITs have been bullish on what they’ve seen so far, fueling confidence in continued growth and stability heading into 2025. Read more here.

RETAIL — These 5 Retailers Need A Strong Holiday Season (Retail Dive): Not every company on this list is struggling financially, but Target, Ulta, and Kohl’s are among retailers relying on a strong 2024 holiday season to boost performance and stabilize future growth. Read more here.

FINANCING — Corvias Secures $560M For U.S. Army Projects (Corvias): Corvias has obtained $560M in funding to support upgrades and expansions across U.S. Army military housing facilities. Read more here.

INVESTMENT — Morgan Stanley Buys 8 Senior Housing Communities (Morgan Stanley): Morgan Stanley Real Estate Investing has acquired a portfolio of Brightview Senior Living communities from Harrison Street. The portfolio is comprised of 1,186 units in the Baltimore, Philadelphia, Providence and Boston metropolitan areas. Brightview will continue to operate the communities. Read more here.

POLITICS — Trump Names Broker As Austria Ambassador (Queen City News): A North Carolina real estate broker has been selected by Trump to serve as the U.S. ambassador to Austria. Read more here.

BROKERAGE — Battle Over Pocket Listings Intensifies (WaPo): A growing debate over the use of off-market "pocket listings" is heating up, with concerns about transparency and fairness in real estate sales. Read more here.

LEGAL — Trucking Firm RBX Files For Bankruptcy (FreightWaves): Missouri-based trucking company RBX has filed for bankruptcy, citing operational challenges, leaving 255 drivers in limbo. Read more here.

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The First Draft is produced by Director of Newsletters Jay Rickey, Managing Editor Catie Dixon, Editor-in-Chief Mark F. Bonner and Deputy Newsletter Editor Kayla Carmicheal, with an assist from AI. We’d love your feedback! Email us at firstdraft@bisnow.com.