What's Happening Now
Another week and another news cycle of Amazon continuing their massive run of growth. As you’ll read in our links below, I’m not sure there’s anything more emblematic of our times than Amazon announcing they’ll be adding 2,000 jobs at the Lord & Taylor building in NYC, the former headquarters of the oldest department store in the US. Oh, and they bought it from WeWork, who just raised another $1.1 billion from Softbank.
That’s a positive storyline, which stands in stark contrast to another release linked below from Moody’s Analytics who is forecasting US office vacancy rates to peak at an astronomical 19.3%, 19.9% and an even 20% in this year, 2021 and 2022 respectively. That would unfortunately beat the prior record high of 19.7% in 1991. There still remains a very large wild card as to what the long term impacts of remote work will be and how that balances with the tenant needs for more space to socially distance in the workplace.
While the cautious optimism continues in the real estate capital and transaction markets, many questions remain about how long until the private markets’ pricing will adjust to the underlying challenges we are still facing. Dr. Maisy Wong from Wharton commented on a webinar earlier this week that private markets tend to lag public by 4-6 quarters, suggesting that we’re still not seeing the full impacts of the crisis yet, which have largely been softened by the massive amount of money the government has pumped into the system.
What To Watch
Speaking of stimulus, no-deal is not great news. Congress is out of session and it doesn’t appear that we will get any progress on a meaningful extension or new package in the near future. When looking at the NMHC rent tracker, through August 13th the rent collections are about 200bps behind the 2019 numbers, still keeping pretty close track with what we’ve seen over the last several months. August is likely still a beneficiary of the final enhanced unemployment benefits from July, which means September will be a pretty telling month if we don’t have anything new on the stimulus front.
Keep an eye out for an information packed podcast next week with Ivy Zelman, of Zelman & Associates, where we took a deep dive on the residential space and her outlook. We discussed what parts of this current crisis are accelerants to already existing trends, and where some of those longer term changes may stick as it relates to housing.
Let us know if there’s anything you’d like us to cover in this newsletter or on the podcast! This is intended to be a resource for all who read, not just a place for me to ramble once a week. As always, stay safe out there, wash those hands and we’ll get through this together!
-Adam Hooper, CEO
20192020Rent Payments Collected by April 13th90.1%85.0%Rent Payments Collected by May 13th89.8%87.7%Rent Payments Collected by June 13th88.9%89.0%Rent Payments Collected by July 13th90.1%87.6%Rent Payments Collected by August 13th88.9%86.9%*Data brought to you by NHMC Rent Payment Tracker
CurrentPrior Week Change10 Year Treasury0.643%-0.066%DOW27,739.73-156.99S&P 5003,385.51+12.08Unemployment Rate10.2%--Total US COVID-19 Cases5,595k+337kTotal US COVID-19 Tests69,580k+4,970k*Metrics as of 11am EST on Friday, August 21
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Bruce Stachenfeld, Chairman at Duval & Stachenfeld, joined us on the podcast to discuss his predictions for the real estate industry based on conversations he is having with industry experts.
Some hedge funds and private equity firms that lent money to property owners are now suing them for falling behind on interest payments.
E-commerce giant to bring 3,500 jobs; 2,000 will be at NYC’s Lord & Taylor building
National vacancies will rise past historic highs within the next few years.
Reviewing current conditions, panelists agreed that the capital markets have been very active because of low interest rates and favorable spreads.
CBRE's new Deal Flow Indicator suggests a recovery from the low point of the pandemic as the number of signed confidentiality agreements increases.
With unemployment levels still high and extended federal benefits now expired, more renters will have trouble staying current in the months ahead.
Fund manager Carlyle Group tells employees to avoid public transport when offices reopen to stop staff spreading coronavirus.
E-commerce behemoth Amazon will open a 2,000-person office at the former Lord & Taylor flagship on Fifth Avenue, the company announced this morning.
*If you like this post, be sure to enroll in our free six week course on the fundamentals of commercial real estate investing — RealCrowd University.*