84 Lumber Looks to Expand After Huge Cash Injection

84 Lumber Looks to Expand After Huge Cash Injection

84 Lumber was founded in 1956 by Joe, Norman, and Bob Hardy in the Southwestern PA town of Eighty Four. In 60 plus years of operation, the lumber company has added hundreds of locations across the country including New York, Massachusetts, Florida, and more. As part of this expansion effort, 84 Lumber has recently secured a $310 million loan which will replace a pre-existing $400 million dollar loan secured in 2016. Since that time, the company’s performance has exceeded expectations and its market competition, leading to the opportunity for a more favorable loan arrangement.


Today, we will review the details of 84 Lumber’s $310 million dollar cash injection, review the business history of 84 Lumber, and discuss the impact that this deal and ongoing 84 Lumber projects will continue to have on the local commercial real estate market. 


84 Lumber Looking to Expand with $310 Million Loan

84 Lumber wants to use funds to expand into new territories.

There are several key reasons why 84 Lumber’s loan restructuring is significant for the company:


84 Lumber is looking to improve their IT capabilities. Regardless of industry, information technology is a part of any large business. One of the primary drivers of this new $310 million loan is 84 Lumber’s desire to modernize their IT infrastructure to improve client relations and their internal systems.


84 Lumber wants to use funds to expand into new territories. While 84 Lumber has traditionally been a Western PA organization, it has already expanded across the country into several states. This new influx of capital will allow the company to potentially expand into new territories including Sacramento, CA and Northern Virginia.


The loan will allow for financial restructuring. According to recent reports, the final primary reason for this new loan is to refinance. “The proceeds will be used to refinance the $307.5 million outstanding Term Loan B and $400 million ABL Revolver. In addition to extending the maturities, the Term Loan B reduced pricing by 100 basis points to LIBOR plus 425 basis points. As a result of the refinancing, the company now has no debt maturities prior to 2024.”


A Brief History of 84 Lumber’s Business Expansion

A Brief History of 84 Lumber’s Business Expansion

To understand the significance of this new loan, we can also explore the history of 84 Lumber’s presence both locally and nationally.


  • 84 Lumber is founded in 1956 by Joe Hardy alongside his two brothers Norman and Bob, and close friends Ed Ryan and Jack Kunkle. The initial business model was a “cash and carry” lumber yard where industry professionals and handymen could come buy affordable, high quality products. The business was modest but immediately successful.
  • In the 1960’s, the business experienced its first major expansion by growing their local business with new locations, bigger warehouses, and a larger inventory supply. The first years of 84 Lumber’s history involved fast yet sustainable growth.
  • The 1970’s saw 84 Lumber opening an additional 229 locations, expanding beyond the immediate Western Pennsylvania market for the first time. 
  • The 80’s and 90’s were an era of revamping the 84 Lumber business model. Instead of exclusively catering to professionals, they remodeled many of their stores to make them friendlier for a broader demographic. 
  • 84 Lumber hit $1 billion in sales for the first time in 1993.
  • In 1997, 84 Lumber opened its 400th store.
  • Today, 84 Lumber is refocusing on its information technology sector to move the business into the next decade seamlessly. The company accrued $3.86 billion in sales in 2018, and continue to enjoy healthy growth.


Impact of 84 Lumber on Local Commercial Real Estate

Impact of 84 Lumber on Local Commercial Real Estate

The relationship between 84 Lumber and local commercial real estate is actually somewhat complex. On one hand, 84 Lumber contribute massively to the local economy by creating jobs, owning local properties, and generally injecting cash into the region. On an entirely different level, having the “nation’s leading privately held supplier of building materials, building supplies, manufactured components and industry-leading services for single- and multi-family residences and commercial buildings” in our backyard has a material impact on the CRE market as well.


Due to this unique circumstance, 84 Lumber is as entrenched as any local company when it comes to commercial real estate. While other organizations like PNC and UPMC may own and operate significantly more locations, 84 Lumber is a major player within the CRE industry itself. Pittsburgh commercial real estate can certainly look to 84 Lumber’s continued success and expansion with recent deals like this $310 million loan restructuring as a sign that our market will continue to hold strong.


Going Forward

84 Lumber’s steady growth and solid leadership is encouraging. With favorable loan agreements and new stores going up every year, the banks clearly agree. Having such a large commercial real estate building supply provider in Western PA offers a unique advantage to local construction crews. While the company continues to expand across the country and perhaps internationally, they retain a large presence in the Pittsburgh area and have no plans to relocate any time soon. 84 Lumber’s continued success can only be a positive sign for commercial real estate in our region.

Insurance Costs Will Jump in 2020 – For Construction Industry Too

First the good news: improvements in workplace safety have helped push losses and Workers Compensation claims lower, which is expected to keep the insurance bill at the same rates or lower in 2020. Insurance for environmental contractors is also expected to be slightly less expensive in 2020. For the rest of the insured market, not so much.

Natural disasters and unlimited liability exposure have pushed the property/casualty sector of the insurance industry into unprofitable territory. Insurance companies have done well with investments and at attracting capital in recent years. Some $800 billion in excess capital exists in the insurance industry, but the additional capital is not expected to translate into more capacity for property/casualty lines. This is in direct opposition to what is going on in the construction surety market, which has seen steady low loss ratios for a decade and plenty of capacity for higher bonding limits. Insurance industry experts see the industry conservatively deploying and investing its capital, rather than expanding the capacity for property/casualty insurance. In fact, several of the industry’s biggest insurers are debating an exit from property/casualty insurance.

The biggest culprit is catastrophic losses on natural disasters. Regardless of your politics and beliefs about the impact of climate change, the frequency and severity of catastrophic natural disasters has increased. Floods, tornadoes, hail storms, and wildfires have all caused much greater damage than in previous decades. Houston, for example, has seen two 500-year flood occurrences in the past three years.

Likewise, the frequency and severity of liability claims have increased, with insurers seeing little hope of tort reforms or limitations in the offing. Casualty claims and losses, even for companies with risk-mitigation strategies in place, have increased.

Insurers, not surprisingly, are responding to these unfavorable trends by employing more conservative underwriting standards and raising premiums. It’s easy to shake a fist at the insurance company but it’s important to realize that the premium charged an insured is a calculation of the relative risk of the activity as a whole, in addition to the judgment of the insured’s risk. In other words, if the activity – such as driving a car – has become more expensive to insure or has an increased risk in general, the insurer needs to collect more money to respond to claims. Those actuarial calculations are the foundation of the insurance business. Companies can shave insurance costs by being safer but when insurance conditions become more expensive, everyone pays.

According to USI’s Commercial Property and Casualty Outlook for 2020, insurers expect to raise premiums on most property policies between 10% and 20% for most non-catastrophic property coverage, and as much as 60% for insurance with catastrophic coverage. Auto liability insurance is forecast to increase by 10% to 25%. Excess liability will go up 10% to 25%, as will errors and omissions. The cost of public company officers and directors coverage is set to increase 25% to 50%.

Regional construction news: ALCOSAN’s $130 million North Plant Expansion will be advertised for bid at the end of January. Duquesne University selected Jendoco Construction for its $18 million St. Martin Hall renovation. Fluor has issued the second phase package of US Steel’s $900 million Edgar Thompson Works modernization. The package includes a 50,000 square foot building. Mascaro, Songer and Stevens are expected to bid. Mascaro was awarded the $12 million first phase of the work. The $10 million, 376-car parking garage for District 15 should be bid by Carl Walker Construction after January 27.

The Rise of “Urban” Suburbs

The Rise of “Urban” Suburbs

We tend to think of urban areas and suburban areas as completely different entities. One is filled with skyscrapers and buslines and the other is filled with houses with picket fences and well maintained landscaping. In reality, the line between these two residential and commercial real estate areas is continuing to blur in 2020. This trend is holding true in mid major cities like Pittsburgh and large cities like New York and Boston alike. So called urban suburbs are extremely appealing to young renters/home buyers as well as businesses. This is because they mix affordability with convenience and amenities. 


This trend is what has driven the surge in investment and migration to neighborhoods like East Liberty, Lawrenceville, and, 20 years ago, the South Side. And it’s what is driving the speculative investment in next-level urban suburbs like Sharpsburg, Millvale, Carrick, and parts of the North Side.


With this in mind, today we will discuss the rise of urban suburbs by defining urban and suburban areas, pin down what it means to be an “urban” suburb, and why younger Americans are pushing real estate trends in this direction. 


Defining Urban and Suburban in 2020

Defining Urban and Suburban in 2020

Per the Census Bureau, “urbanized areas” are regions in or surrounding a city that have more than 50,000 people living in them. If these neighborhoods are within the limits of a city, they are thought of as urban, and if they are outside city limits, they are colloquially referred to as suburban. Urban clusters, on the other hand, are urban areas with fewer than 50,000 people. In a more general sense, we tend to think or urban areas as being more metropolitan with less space, more people, and greater access to amenities like public transportation and entertainment. 


Suburbia exists somewhere between urban and rural living. One of the definitions of the word suburb reads: “the residential area on the outskirts of a city or large town”. While this has traditionally been true and still remains true in many cases, the residential aspect of this definition is changing. Commercial real estate in the suburbs is extremely active and lucrative as many individuals look to live, work, and play close to urban environments without the hassle of fighting against rush hour traffic.


What are “Urban” Suburbs?

What are “Urban” Suburbs

Despite a great deal of focus being placed on the idea of a Great Inversion, where affluent Americans are favoring cities over suburbs, the majority of Americans today continue to live in suburbs. Although it is true that some suburbs are facing challenges, many that are referred to as “urban suburbs” are thriving. In lieu of an official government definition of what constitutes a suburb, let alone the different types of suburbs, urban suburbs have come to be defined by their characteristics, namely urban neighborhoods outside of the city that provide a mixture of access to urban centers, universities, a stable housing market, reputable public schools and transportation. 


An example of an urban suburb is Mount Lebanon, an affluent neighborhood 7 miles south of Pittsburgh, with a median home value of $209,506, a reputable public school system that has won multiple National Blue Ribbon School awards, and a light rail system that provides easy public transportation to downtown Pittsburgh. Uptown Mount Lebanon has another key feature of urban suburbs: a booming business district with hair salons, cafes, shops, galleries, restaurants, and banks. Other national examples of larger suburbs with a more urban atmosphere include Grandview Heights, OH and Mountain View, CA. 


Younger Americans Prioritize Convenience and Amenities

Younger Americans Prioritize Convenience and Amenities

Urban suburbs are particularly attractive to younger American families who do not want to compromise on the convenience and amenities of urban living. They allow families to invest in their stable housing markets, reputable school districts, and enjoy access to business centers and easy transportation to metropolitan areas. Both renting and buying in these markets is attractive, as debt-ridden millennials who are parents may want easy transportation to their city jobs and favor renting in these areas for their school districts. For instance, almost 30% of residents in Mount Lebanon choose to rent, with the median rent coming to $861. 


With the numerous websites and mobile apps geared towards renting and buying property, these desirable characteristics are easier to search for than ever. For instance, real-estate websites such as Zillow offer school ratings, commute times, walk scores, and transit scores under each property listing. With 81% of older millennials using mobile apps to find their homes, urban suburbs with high walk, transit, and school scores are coming out on top. 


Going Forward

The rise of urban suburbs offer many takeaways. Suburban neighborhoods who are struggling to attract new home buyers can consider ways of increasing access to transportation to a nearby city. Trends show that urban suburbs offer many opportunities for both residential and commercial real-estate. Government agencies may benefit from defining suburbs and sub-types of suburban neighborhoods to better study trends. In the meantime, the rise of urban suburbs are a respite for those who are looking to rent or purchase property in a good school district but do not want to compromise on urban amenities and public transportation

Start the Week with Some Pittsburgh Construction News

The first packages for the $1.1 billion Terminal Modernization Program are hitting the streets. A $15-16 million package of site work and building work to enable the construction is coming out to bid. The work will allow for roadways, logistics, and mobilization around the existing airport infrastructure so that the multi-year project can proceed without interruption to the normal operations of Pittsburgh International Airport.


PJ Dick is taking bids on a couple of its $80-100 million projects, the WVU School of Business and Pitt’s Scaife Hall expansion. Rycon Construction will put CMU’s $36 million Fifth and Clyde Residence Hall out to bid next week.


Shannon Construction has been selected to do the $7 million TI for Siemens Mobility at the former Waterfront Macy’s. Sentinel Construction has started construction of the $3 million HDR Engineering TI at One Oxford. Timbers Building Co. has started work on the $15 million renovation of the Lemington Home for affordable housing. Jendoco started construction on the $9.5 million renovation of the Fifth/Neville Apartments. Sano-Rubin Construction is preparing to start construction on a $15 million medical marijuana facility for PharmaCann in Carnegie.


Rendering courtesy Duquesne Light Co.

In Oakland, two projects that might be below radar (although both have had public attention) are the new Duquesne Light Riazzi substation and the $7 million mixed-use development for Mike Wu at Craig and Winthrop. Burns & McDonnell is the turnkey engineer/CM for the Duquesne Light project, which is an 8,000 square foot (by four story) structure located on Boundary Street beneath the Schenley Park Bridge. No costs have been released but the project should be $5-10 million or more.

Commercial Real Estate and US Economic Trends Going into 2020

Commercial Real Estate and US Economic Trends Going into 2020

As with most investor markets and economic issues, commercial real estate is an ever-changing reality. What might look like a safe bet today could lead to huge losses tomorrow. Government regulations, environmental factors, and a looming recession are just a few of the ways that the commercial real estate landscape can change at any moment. Yet seasoned real estate veterans understand that these changes are just a surface disruption of CRE wisdom which generally holds true over time. 


With all of this in mind, here is a brief report on the current realities of commercial real estate in the US as well as some insights into the near future.


2019 Commercial Real Estate by the Numbers

2019 Commercial Real Estate by the Numbers

The commercial real estate market is currently valued in the ballpark of $1.1 trillion. To put that in perspective, if a trillion dollars represented $10,000, a billion dollars would be $10. Needless to say, there are massive amounts of revenue being generated in the CRE market in 2019. Here are a few other statistics to give a clearer picture of the current state of CRE:


  • The commercial real estate industry experienced an estimated growth of 2.2 percent in 2019. This is down from an average of ~4 percent annual growth in the CRE industry over the past five years.
  • Commercial real estate growth has outpaced overall real estate growth, rental rate growth, and leasing growth in 2019. 
  • Seasonalized annual construction values from Q2 2019 are down by about five (5) percent compared to similar estimates from 2018. Newly constructed commercial structures saw the largest value losses over this time period. 
  • Commercial property valuations are on a steady rise beginning with the recovery period in 2009-2010. During this time period, prices have risen the most in the Western United States with the Midwest lagging behind.
  • Rental rates have flattened to a relatively low 1.4 percent year over year growth from 2018 to 2019. This trend is expected to continue with many market indicators pointing towards a stagnant apartment market overall.


The State of the US Economy Looking to 2020 and Beyond

A recession is all but unavoidable in the next few years

Before we stare into the proverbial crystal ball, we should first state the obvious: nothing is guaranteed. That being said, here are some likely events in the US economy over the next several years.


A recession is all but unavoidable in the next few years

As of the writing of this article, the latest news is that doom and gloom predictions about the next US recession may have been exaggerated. Despite this sudden onset of optimism, the plain truth is that recessions are a part of modern free markets. The most optimistic, realistic view of the situation is that our next recession may not take place in 2020 but in the years to come. Whether the next economic downturn occurs in 2020, 2021, or beyond, it will almost certainly have a material impact on commercial real estate just as it did during the Great Recession of 2008.


Climate change will continue to be a major player for the economy and for CRE

Recent scientific studies have predicted that extreme weather events in the United States will rise by approximately 50% by the end of the 21st century. This continues the already observable trend of extreme weather patterns like more frequent and stronger tornadoes, hurricanes, floods, and other natural disasters. This will impact both the overall economy and commercial real estate industries for obvious reasons. Building codes are likely to be updated, insurance costs will rise, and other incidental expenses will almost certainly take a hit. Economists warn that climate change will likely cost the US economy 100’s of billions of dollars by the year 2090.


Young adults will continue to struggle financially

Young adults will continue to struggle financially

Last but not least, the population of adults who should be representing the largest buyers in the US economy will continue to be hit by crippling debt, healthcare costs, and stagnant wages. Barring an unlikely dramatic shift in the political and/or economic landscape, the US Debt Crisis will be a huge factor in the economy for the foreseeable future. This has already played a role in lagging rental rates, home ownership, and spending habits. It is difficult to predict how this situation will play out, but younger generations have proven that they are willing to cut costs, something that is not a great sign for economic health.


Going Forward

The commercial real estate sector has been reliably strong for nearly 10 years now. After a two year dip in 2008-09, investors have enjoyed solid returns and steady growth. While it is reasonable to expect another downturn at some point in the next few years, it is also reasonable to believe that the US economy will bounce back and investments will continue to pay dividends. It will continue to be important for investors to keep up with the latest CRE trends such as co-working, energy construction projects, infrastructure construction, and much more. The commercial real estate world’s evolution is ongoing, and the only certainty moving forward is change.

Private Equity Real Estate Funds are Slowing

Private Equity Real Estate Funds are Slowing

For the commercial real estate investor, private equity funds have historically been safe bets which can be used to invest in a volatile real estate market over the long term. Private equity real estate funds are typically purchased by high net worth individuals, trusts, and/or pension funds to build portfolio value. In recent years, as commercial and residential real estate markets have inflated to the tipping point of true value, real estate funds have lost their luster to some investors. 


Today, we will review how private equity real estate funds function and why they are lagging behind when it comes to both performance and participation.


Real Estate Equity Funds 101

Real Estate Equity Funds 101

Private equity real estate is a type of asset which pools private and public funds into the real estate market. Similar to how mutual fund ownership entails privately owning a number of stocks, bonds, money market funds, and other mutual funds, private equity real estate funds entail owning multiple properties through a type of pooled vehicle. While the concept of private equity real estate has been around for since the post WWII era, private equity real estate funds truly took off during the boom or bust economy of the mid 90’s.


Also like mutual funds, private equity funds are a long term investment. There may be penalties for early withdrawals, funds are tied up in the funds, and investors must understand that most private equity funds come with a lock-up period where assets are unredeemable. Due to the nature of real estate equity funds, there is typically a substantial minimum investment both up-front and potentially over time. As we mentioned in the introduction, private equity funds are typically reserved for wealthy individuals, pension plans, or other long-term wealth building strategies.


CRE Equity Funds by the Numbers

CRE Equity Funds by the Numbers

Commercial real estate plays a huge role in private equity real estate funds, but it is not the only player. Let’s take a look at private equity numbers to get an insight into industry trends:


  • 2018 saw an overall fundraising downturn of approximately 10.6 percent compared to 2017. Total 2018 investments totalled approximately $118 billion. This is the lowest annual figure since 2013.
  • During that same 2013-2018 time period, commercial real estate has enjoyed a steady growth rate both in terms of average valuations and total commercial real estate investments. 
  • The 10 largest private equity real estate funds make up over 35 percent of the total investment monies raises in 2018. This top heavy trend is likely to continue as the more well-established funds are better positioned to weather the upcoming bear market.
  • The amount of “dry powder” holdings has also gone up approximately 15 percent year over year. This could signal that investors are losing confidence while also accounting for a lack of fundraising overall. 
  • Despite all of this, there are still large sums of money tied up in the private equity market. Recent figures put the total valuation of the industry at approximately $244 billion spread of 670 private equity real estate funds


Why Private Equity Real Estate Funds are Losing Steam

There are a number of reasons why private equity real estate funds are slowing down. According to the latest reports, here are some of the biggest sticking points facing private equity investors looking ahead to 2020:


A crowded marketplace. Mark Twain once said, “Buy land, they ain’t making any more of it”. In today’s market, this fact of life has been highlighted by population growth, corporate buy-ups, and maturing urban markets. When it comes to private equity firms, prime real estate is going quickly as well. This is yet another reason why firms like Blackstone are dominating the market with multi-billion dollar funds focusing on the highest-value properties.

Real estate market uncertainty and likely recession.

Real estate market uncertainty and likely recession. If you’ve been reading/watching the news lately, you are likely aware of some of the more grim predictions regarding a nearing recession and real estate market downturn. This has led many investors to turn to debt investments and abandon mid to long range real estate investments until the market settles.


Other investment opportunities have taken attention away from PERE. Private equity real estate funds are in a strange middle ground of being well established over decades of solid returns but without the pedigree of mutual funds or the investor excitement of new programs like opportunity zones


Slow payouts for private equity real estate. Many real estate funds have a problem: they have too much cash. This can result in a number of hiccups, including investor payouts being delayed. This is almost a situation where the success of PEREs has led to a bogged down payout process.


Going Forward

Most industry experts agree that private equity real estate funds will continue a modest slide moving into 2020. With economic uncertainty and an already waterlogged investment environment, PEREs will likely take a few years to bounce back. Of course, it is impossible to know how economic performance, consumer spending, CRE, and other outside factors will fall into place over the coming years. Despite all of these huge question marks, private equity real estate funds meet a need for many individuals and organizations looking to buy into potentially high yield, long term investments.

The Devaluation of Traditional Real Estate Capitals

The Devaluation of Traditional Real Estate Capitals

In decades past, the most valuable real estate in the United States was not hard to identify. Commercial real estate in traditional real estate capitals such as Washington, D.C., New York City, San Francisco and other powerhouse markets dominated the landscape. In many ways, this remains true. However, savvy investors are frequently turning to less oversaturated, less expensive markets to make their mark. This has led to a vicious cycle where many traditional real estate capitals have depreciated relative to the overall market. 


To better understand why major markets have become less valuable in recent years, today we will discuss stronger markets in non-traditional areas including the Sun Belt and why the largest real estate markets in the U.S. have suffered.


Suburban Sprawl and the Rise of the Sun Belt

Suburban Sprawl and the Rise of the Sun Belt

The Sun Belt can be considered any land in the southern third of the United States. It should be noted that the Sun Belt absolutely contains powerhouse real estate markets including Los Angeles, Atlanta, and San Francisco. Yet the largest commercial real estate growth is expected to continue in less traditional markets such as Nashville, Austin, Raleigh, Phoenix, and many others. There are a multitude of reasons for these trends, including:


  • Domestic migration favors Sun Belt states. Texas, Florida, North Carolina, and Arizona are the top states for domestic migration over the past ten years. New York, California (a SunBelt state which is an exception to the rule), Illinois, New Jersey, and Ohio are at the bottom of that list.
  • Construction costs and living expenses are lower in many Sun Belt and other non-traditional markets. There is a reason why the largest companies on earth like Apple are choosing to build headquarters in Austin, TX instead of Silicon Valley. Costs are lower and employees are able to live more comfortably.
  • Many Sun Belt states (again excluding California) have less business and real estate regulation. Fewer regulations make for easier, cheaper CRE construction projects in addition to greater flexibility for businesses. 


The Largest Real Estate Markets in the U.S. Have Cooled Off

San Francisco is Experiencing High Office Vacancies

San Francisco is Experiencing High Office Vacancies

Perhaps the most notorious real estate market in the U.S., if not the world, San Francisco’s real estate booms and busts are well documented. The outrageous cost of living is driven by insanely high residential real estate values which make it virtually impossible for long time citizens to continue to rent or to purchase new homes. The commercial real estate industry is experiencing many of the same issues. Recent reports suggest that high labor costs, poor living conditions, and very high lease rates have led companies to steer clear of office space in the Bay Area


This has extended to store front businesses as well, where less foot traffic and higher rents mean less economically viability. Unfortunately, there does not seem to be an easy fix on the horizon. All markets have their tipping point, and San Francisco appears to be on the precipice. What remains to be seen is how the city will bounce back once the real estate market normalizes. 


Traditional Retail Locations in NYC are Struggling

New York is a tough market to pin down. The largest U.S. city could be considered both the healthiest or the most tumultuous real estate market in the country depending on your point of view. And NYC has always been prepared for the recent industry shift towards infrastructure and new construction mega-projects. In this way, the already densely packed city has continued to grow its already robust commercial real estate footprint.


However, the retail sector is struggling in a local economy where retail real estate is incredibly expensive and retail business models are needing to adapt to survive. Where some New York flagships survive on tourist money alone, many are closing their doors in the wake of new economic realities. This has led to many CRE properties losing their value in recent years.


Boston’s Struggling Multifamily Real Estate

Boston’s Struggling Multifamily Real Estate9

Although younger renters are willing to sacrifice other amenities for ideal locations, luxury multifamily complexes in high end Boston markets are struggling. With price points too high for many young adults and many businesses opting for non-centralized locations, downtown apartment living is becoming difficult for real estate investors. The silver lining of these trends in many expensive cities is that multifamily real estate in suburban areas is increasing in popularity and value. Savvy investors may want to look to different locations to fight against the devaluation of downtown apartment living.


Going Forward

Traditional real estate capitals continue to hold a high value when it comes to commercial and noncommercial real estate. That being said, their stranglehold on the most desirable properties has lessened in recent years, giving way for less centralized office buildings and CRE multifamily units. These trends will likely continue with the caveat that major markets like New York and San Francisco will remain extremely desirable to a certain population of businesses and individuals who value urban living.