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Top Real Estate News for Thursday, Nov. 18, 2021: Office Space Subleasing Declines

By Marc Rapport – Nov 18, 2021 at 3:00PM

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Subleasing office space past its peak, while CVS plans 900 store closings.

Subleasing office space dips for first time in the pandemic, and CVS Health (CVS -0.48%) plans to close 900 drugstores. Home profits hit new heights while mortgage applications dip, and a senior housing REIT's wage woes provide sector insight.

Subleasing office dips for first time during the pandemic

Cushman & Wakefield says in its new 3Q21 report that the market for subleasing space otherwise left empty by the pandemic is now on the decline. The commercial real estate (CRE) giant also says that timing would match previous recessions, when sublease space increased for about two years before peaking and then receding.

Businesses have been snapping up the cheaper space, which may impact revenue for property owners -- including real estate investment trusts (REITs) -- but it's been better than no rent at all. The report also points out that central business districts are the primary beneficiaries of the pullback in subleasing.

A pharmacist, a customer and two more people in line.

Image source: Getty Images.

CVS plans to close 900 stores over the next three years

CVS Health said today that it plans to close about 300 of its drugstores a year over the next three years, nearly 10% of its locations, as the company pivots its emphasis to adding more health service at the remaining sites.

The company said it expects to record an impairment charge in the fourth quarter of 2021 of $0.56 to $0.67 a share of earnings. On the real estate side, those stores have been among the reliable mainstays during the pandemic, staying open while so many other brick-and-mortar spots have failed. The impact these closings will have on those retail REITs and other property owners and managers will bear watching.

Home profits are at an all-time high, topping $100,000 per sale

Record-low interest rates and a nationwide housing shortage have pushed home prices to new highs. However, up until this point, profitability on the sale of a home wasn't necessarily running alongside it. Competition in the marketplace, particularly among fix-and-flip real estate investors, meant returns were actually falling.

But according to ATTOM Data Solutions' latest home profit report, that could all be changing. Motley Fool contributor Liz Brumer-Smith parses out the data here and lays out why it's a great time to sell but a bad time to buy.

New home, refinancing applications continue declines in a still-strong market

The Mortgage Bankers Association (MBA) reports this week that applications for both purchases and refinancing are continuing to decline, a trend that is closely tied to rising interest rates. The MBA says that new home applications in October were down 15.2% from a year ago, while refinance applications declined last week for the seventh time in eight weeks.

Mortgage applications were up 6% from a month earlier, the trade group notes, and new home sales were at their strongest monthly pace since January. The average size of a loan for a new home was $412,000, another new record in the MBA's surveys.

Ventas' real wage problem is contract labor -- what that means for a whole niche

Inflation is one of the big headline-grabbing stories right now. Employees around the country are asking for and getting salary increases. One area in which that is particularly true is senior housing, a segment where demographics would seem to say that the only trajectory is up.

Motley Fool contributor Reuben Gregg Brewer explains here why investors in Ventas (NYSE:VTR) and other senior housing REITs need to monitor the contract labor issue but also understand that it will, eventually, turn from a negative to a positive as the labor market balances out and senior housing operators hire new employees.

Marc Rapport has no position in any of the stocks mentioned. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.

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