The Small Balance Intersection Update - October 26, 2024

Did You know:

Ford's Production Innovation (1911): On October 26, Henry Ford received a patent for the assembly line process, which transformed automobile manufacturing and made cars affordable for the average person. Ford's innovative production methods eventually influenced manufacturing practices in various industries worldwide, revolutionizing efficiency and productivity.

Premium View Overlook

Luxury Condos Take a Swing at Stadium Living

The article highlights the growing trend of luxury residential developments offering views of Major League Baseball stadiums, providing fans a unique way to enjoy games directly from their homes. A prime example is a townhouse in The Legend building in San Diego, which overlooks Petco Park, home of the Padres. Purchased for $998,500 in 2007, it is now listed for $1.5499 million, reflecting the added value of such proximity to a stadium. Similar developments are emerging across the U.S., including historic rooftop buildings overlooking Chicago’s Wrigley Field and newer luxury complexes like St. Louis’s One Cardinal Way. This building offers upscale amenities like an infinity pool with views of Busch Stadium and has units that are nearly always fully occupied, with rents ranging from $1,500 to over $6,000 per month.

In Minneapolis, North Loop Green 360 and in Washington, D.C., The Kelvin provide similar setups, integrating luxury living with access to baseball games. The Capitol Riverfront area surrounding Nationals Park has transformed into a thriving urban district, showing a broader trend of mixed-use developments near sports venues. These projects have revitalized previously underutilized spaces, turning parking lots into bustling neighborhoods filled with shops, entertainment, and high-end residences. While these stadium-view properties come at a premium, they typically maintain high occupancy, as seen in the near-constant demand for units at One Cardinal Way. This trend reflects how developers are capitalizing on the appeal of stadium-adjacent living, combining entertainment, convenience, and luxury. As this niche market expands, it continues to shape urban environments and enhance local economies.

Read the full article here.

Back in the New York Grove

Manhattan Office Market Sees Uptick, Vacancy Declines Amid Conversions

The Manhattan office market is showing signs of recovery, with 26.1 million square feet of leasing recorded through September, marking a nearly 25% increase year-over-year, according to Newmark. The total leasing volume for 2023 is expected to exceed the previous year's 30 million square feet. The overall vacancy rate has declined by 90 basis points from Q2, bringing it down to 18.5%, with the most improvement seen in lower Manhattan where the rate dropped to 20.6%, its lowest in three years. However, this is partly due to the conversion of over 12.8 million square feet of office space into residential units, reducing available inventory by an estimated 11.6%. Rent prices vary significantly across Manhattan's submarkets, with the Far West Side (including Hudson Yards) being the priciest at $128.73 per square foot, followed by the Plaza District at $120.42, and Park Avenue at $116.65. Despite these improvements, concessions such as free rent and tenant-improvement allowances appear to have plateaued. SL Green Realty Corp., a major Manhattan office space owner, reported no further increases in concessions, having signed 42 leases totaling 763,755 square feet in Q3 at an average rent of $102.49 per square foot, mostly for high-end properties. These developments suggest a complex recovery landscape, with conversion trends and rent stabilization playing crucial roles.

Read the full article here.

Credit Cycle Curve

The Cyclical Nature of Lending Standards and Economic Impacts

The blog post explores how lending standards and terms evolve over the business cycle using data from the Federal Reserve’s Senior Loan Officer Opinion Survey. The survey, conducted quarterly, reveals that banks typically tighten lending standards for commercial and industrial loans during recessions, with these restrictions often beginning before the downturn hits. As of Q2 2024, the tightening trend that began in 2022 shows signs of abating. Lending terms, such as credit line sizes and loan rate spreads, also follow this cyclical pattern, tightening during recessions and easing in expansions. The post highlights that during economic growth, banks anticipate better loan repayment rates, leading to laxer standards and increasing credit availability, which can amplify productivity gains. However, this easing can backfire, as competitive pressures during expansions may result in reduced screening of borrowers, raising risks of funding unprofitable projects. Policymakers have expressed concerns over these practices, with increased regulatory attention dating back to the late 1990s. Data also shows that loan delinquency rates, which typically fall during economic growth, often begin to rise before a recession fully sets in, aligning with the hypothesis that riskier projects gain funding during prosperous times.

Read the full report here.

Street Name: Credit Cycle Curve Traffic Sign: Caution: Tightening Ahead Header: The Cyclical Nature of Lending Standards and Economic Impacts

Fall Classics

Explore These National Parks Before Winter Closes In

As fall approaches, national parks across the U.S. begin to transition, with many facilities closing as temperatures drop. Yellowstone, for instance, sees closures start as early as September, though October remains ideal for visiting iconic spots like Old Faithful. Pictured Rocks National Lakeshore offers stunning fall foliage views and lakeshore activities but closes visitor centers at the end of September, limiting access later in the season. Theodore Roosevelt National Park in North Dakota, with its rugged landscapes and wildlife, closes its facilities during winter; the best time to explore is from mid-May to mid-October. Crater Lake, a snowy Oregon destination, shuts down many trails and roads from mid-October due to heavy snowfall, though the park entrance stays open year-round. Katmai in Alaska offers prime bear-viewing opportunities in the summer and early fall but closes services after September. Lastly, Glacier National Park's facilities begin to close by late October, making early fall the ideal time to visit. Plan visits accordingly to avoid winter limitations.

Read more here.