A report from Market Watch. “Like floodwater, mortgage bond losses flow from the bottom up. But with today’s compressed bond yields and an uncertain backdrop for commercial properties, Daniel McNamara, principal at a hedge fund that’s been in the spotlight for its success shorting debt tied to struggling malls. sees ‘little room for error’ in owning some lower-rated notes. ‘Everyone has been very vocal about struggling malls, but I really think multiple sectors of commercial real estate are in secular decline,’ he told MarketWatch.”
The Union Tribune in California. “For the first time in roughly 10 years, rent prices did not go up for much of San Diego County. Landlords had more than just slowed rent growth to worry about in 2020. A patchwork of laws prevented eviction of tenants. All of this makes what is happening right now surprising. There are more than 4,000 new apartments set to open this year and developers show no sign of slowing down. If the total number of projected apartments are built in 2021, it could be one of the biggest years for multifamily construction in recent memory.”
“Zumper said the price of a one-bedroom in San Diego was up 2.9 percent for a one-bedroom, other markets across the nation experienced declines. San Francisco was down 23.9 percent, New York down 21.7 percent, Boston down 19.2 percent, Seattle down 14.8 percent and Miami down 9.1 percent.”
The Chicago Tribune in Illinois. “A Canadian firm wants to build more than 1,000 apartments on West Monroe Street near the Kennedy Expressway, the latest example of a developer forging ahead with big plans despite the economic devastation. Downtown Chicago apartment occupancy fell to 86.5% in 2020, according to Integra Realty Resources, which is the lowest level recorded since the research and appraisal firm began its downtown survey in the 1990s.”
“Net effective rents, which factor in concessions such as free rent, fell more than 18% in 2020 in higher-end buildings, reaching their lowest level since 2013, according to Integra. Another Vancouver-based developer, Onni Group, last year confirmed plans to build more than 2,000 apartments on the southern tip of Goose Island. On the Near North Side, Onni Group is in the process of developing the three-tower, 1,289-unit Old Town Park development that’s replacing the Atrium Village apartment complex. Near there, Chicago’s JDL Development in October disclosed plans to build more than 2,600 apartments, condos and townhomes.”
From Bisnow New York. “About 200 hotels have been closed in New York City since the start of the coronavirus pandemic, and occupancy is said to be less than 40%. ‘Demand in New York City has never really been the problem, any weakness in performance that we have seen has been supply-induced,’ said HVS Director Chris Fernandes. ‘So I think the bigger headline when it comes to New York City isn’t if demand will return … the bigger if is the supply side of the equation. Depending on how many hotels we actually see fall from COVID will really begin to dictate how quickly the recovery can ramp up over the next few years.’”
The Sun Coast News in Florida. “Pasco County’s leaders might be killing its economic and job-creating future by turning properties zoned for business into multifamily locations, Commissioner Mike Moore said. Moore declared that there are many multifamily development ‘entitlements’ that can be built, and stopping the ‘plopping’ of more of them in some areas of the county through rezoning will not have a negative effect on the future economy. ‘There are tons of entitlements for apartments. They’re sitting and waiting for them to be built,’ Moore said. ‘Keep rezoning these properties and doomsday will come.’”
“At a kiosk outside the commission chambers, resident Mark McBride said that he and others are not opposed to apartments. ‘We just don’t want oversaturation of apartments,’ he said.”
“Joel Tew, a development attorney, cautioned the commissioners on trying to interfere with the free market they claim to support. ‘Government is supposed to determine if use is consistent with the comp plan,’ he said. ‘I’ve never seen a Pasco County Commission that tried to control the free marketplace. That is anathema to what you stand for.’”
From Bisnow Washington DC. “Just two years ago, coworking was the fastest-growing sector in the D.C. office market. That dynamic has now flipped. Flexible workspace providers have given back hundreds of thousands of square feet of space during the pandemic, further weakening a D.C. office market in desperate need of new growth sectors. ‘WeWork, even before the pandemic, we all realized that their business model of expanding as rapidly as possible in some of the most expensive buildings in the city was unsustainable pre-pandemic,’ Savills Corporate Managing Director Jon Glass said. ‘Now they are recorrecting a lot of the mistakes that they made in the past, and it’s these landlords that took a flyer on them that are bearing the brunt of their mistakes.’”
From CBC News in Canada. “Empty offices left behind by newly minted remote workers and other upheaval caused by the pandemic have begun to show up on the rental market. For those clients who are looking for new space, Darren Fleming, an Ottawa-based commercial real estate broker, says they have an ‘unparalleled amount of choice’ and the potential to land incentives such as free rent for one year. ‘If you’re a tenant looking for space right now, there’s a whole lot of people who don’t have a lot of alternatives to rent to,’ he said.”
“Raymond Wong, vice-president of data operations and data solutions at Altus Group, characterizes the difference in availability in Toronto from pre-pandemic to now as ‘night and day.’ ‘That’s why [the city has] close to nine million square feet under construction right now in the downtown to facilitate that [pre-pandemic] pent-up demand,’ Wong said.”
“For more than five years, Toronto has had the most construction cranes in operation in North America, according to international construction cost surveyors and consultants Rider Levett Bucknall. The firm is set to release its latest crane index ranking later this month that it says will show Toronto is still at the very top.”
The Weston Mercury in the UK. “The coronavirus pandemic has wiped £26million of the value of two investment properties bought by North Somerset Council for more than £62million in 2018. Leader Don Davies said he had spoken out against buying the Sovereign Shopping Centre for £21million and the £38million purchase of the North Worle District Centre when he was an opposition councillor, but both deals went ahead. Following the devastation inflicted on the retail sector by Covid-19, the properties are now worth £4.1million and £30.7million respectively.”
“Asked if he regretted the investments, Councillor Davies said: ‘I questioned the purchase of them. I don’t think it was a good investment. I don’t think it was properly thought through. I can’t do anything about it. The last thing anyone would expect us to do is sell them off in a buyers’ market. We’d take a bigger hit if there was a fire sale.’”
From Stuff New Zealand. “Auckland’s CBD is the country’s largest employment centre and the central node for almost every form of private and public transport. Yet its rents keep falling thanks to a city-wide building binge spurred on by the Auckland Unitary Plan (which loosened planning rules across the city), more ex-AirBnB rental supply coming online, and a severe post-Covid-19 drop-off in demand. Additionally, the number of new homes consented per 1000 residents there increased to 9.5, a significant increase on the low of 2.2 seen just over a decade before in the year ended August 2009.”
“One of the latest is New Zealand’s largest residential tower, the Pacifica. Around 80 per cent of the apartments were reportedly sold two years ago, but a lot of apartments in Auckland are bought by investors who then rent them out to people working, studying or simply visiting the CBD. Apartment Specialists director Andrew Murray says you will see further movement downwards even at the Pacifica.”
“‘[The Pacifica has] got to find its rental market. It’s going to affect the high-end market. And stuff that’s not new is going to come in behind [the Pacifica] because everybody likes brand new, but the prices they thought they were going to get for rentals, it’s going to be way lower. I reckon it’s going to be 20 per cent lower than what they thought it would be. It’s a big drop from what you’ve been sold, and I pretty much guarantee that.’”
The Daily Mail on Australia. “Inner-ring suburbs are expected to outperform the outer suburbs in 2021 – provided the properties aren’t home units. Metropole Property Strategists director Michael Yardney said newer apartments near the central business district, however, would miss out on the boom. ‘High-rise apartment towers in our CBDs which were already suffering from the adverse publicity of structural problems prior to Covid-19 will now become the slums of the future as they are shunned by homeowners and investors,’ he said.”