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Sears liquidation would slash Seritage's income; co-living trend on the rise

Commercial real estate

* Bloomberg News reported that a liquidation of bankrupt retailer Sears Holdings Corp. would cost Seritage Growth Properties 47% of its annual rental income, equivalent to roughly $84 million in cash flow. Citing regulatory filings, the news outlet reported that Seritage, created in 2015 to hold certain Sears and Kmart locations, generates rent from 82 Sears properties.

Seritage has been signing up new retail tenants to occupy former Sears locations and has in some cases replaced the shuttered stores with residential projects, the news outlet said, adding that among Sears' 142 planned store closures, 42 are on Seritage-owned properties.

* CBL Properties said it has redevelopment plans in place for three Sears locations in its portfolio and has been actively marketing other Sears spaces to potential replacement tenants. CBL Properties has six Sears locations in its portfolio that are set for closure, including one location owned in a 50/50 joint venture and another owned by a third party.

* The Wall Street Journal featured a look at the rise of the relatively new co-living concept as developers prepare to build some of the largest co-living properties in North America. The concept allows tenants to lease rooms in larger apartments while benefiting from shared access to amenities and common spaces.

San Francisco-based startup Starcity is buying a development site in downtown San Jose, Calif., where it plans to develop a 750-unit co-living project. It is also planning a 270-unit project in San Francisco's SoMa area. Openings of both projects are expected in 2021 or earlier, the publication added.

Co-working giant WeWork Cos. also runs a co-living segment called WeLive that has completed two projects, according to the report.

* Roughly 78% of respondents in a survey by Freddie Mac said renting is more affordable than homeownership, marking an 11-percentage-point increase from six months ago, the Journal reported. The publication added that demand for for-sale housing could remain subdued in coming months, based on the findings of the survey.

* Entertainment and arts-focused law firm Frankfurt Kurnit Klein and Selz has leased 57,000 square feet at Fosun International Ltd.'s 28 Liberty St. in Manhattan, N.Y.'s Financial District, The Real Deal reported, citing unnamed sources. The real estate arm of the Chinese industrial conglomerate recently denied reports that it was looking to sell the 60-story tower for $1.6 billion.

One of the sources said the property is now 80% leased, The Real Deal added.

* Office leasing in downtown Chicago totaled 2.3 million square feet in the third quarter, down from 3.2 million in the second quarter, The Real Deal reported, citing Savills-Studley. The availability rate in the downtown area increased to 16.9% from 15.5% due to slower leasing, while average asking rents fell to $39.60 per square foot from $40.10 per square foot.

Office leasing in the suburban Chicago office market fell more than 20% quarter over quarter to 1.1 million square feet in the third quarter, which led to an increase in the availability rate to 28.3%.

The day ahead

Early morning futures indicators pointed to a lower opening for the U.S. market.

In Asia, the Nikkei 225 was up 1.29% 22,841.12.

In Europe, as of midday, the FTSE 100 was up 0.20% to 7,073.55, and Euronext 100 had climbed 0.19% to 1,006.33.

On the macro front

The MBA mortgage applications report and EIA petroleum status report are due out today.

Click here to read about today's financial markets, setting out the factors driving stocks, bonds and currencies around the world ahead of the New York open.

Now featured on S&P Global Market Intelligence

Private investors crowd hotel property market in a tough moment for REITs: There are ample hotels on the market, including at least one luxury portfolio, but real estate investment trusts face a host of challenges competing for them, observers said.

Hard-hit homebuilders may find refuge in shift to affordable product: Homebuilders have entered a period of pronounced weakness, but analysts said the group will benefit by doubling down on their slow transition to entry-level and affordable product.

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