A report from the Commercial Observer. “New York is going to need a long time to recover from 2020. Exhibit 1: Givenchy and its parent company LVMH just paid a whopping $24.5 million to not finish their leaseat Jeff Sutton’s 747 Madison Avenue. That’s how bad retail has gotten along Madison Avenue. It’s worth taking a $24.5 million hit and leaving in 2022, rather than waiting around until 2029.”
“Exhibit 2: While room rates have been spiraling down and vacancy rates exploding, there is a cold war between hotel owners and hotel workers that has been ongoing since COVID-19 struck. This can’t be good for an industry that has been closing hotels left and right. Exhibit 3: Sublease space is exploding. According to a recent report by Savills, there is some nine million square feet of available sublease space in Manhattan. This will mean a lot of downward pressure on asking rents.”
“And some have put real capital down on a recovery. ‘We’ve put a lot of money to work since the pandemic hit — over $1 billion,’ Starwood Capital Group’s Barry Sternlicht told Commercial Observer this week. ‘We’ve bought some CMBS securities, we’ve bought some bonds at a discount, stuff we’d be happy owning the assets if they defaulted. We took some stock positions in the pandemic, in stocks we thought were super cheap, and we cont”inue to hold most of those positions because we know there will be a recovery one day.’”
From Bisnow on Massachusetts. “As Millennium Partners’ billion-dollar Winthrop Center rises, the future of the firm’s planned 350-foot affordable housing tower in Boston’s Chinatown is in doubt. Millennium originally pledged $48M to a city fund geared toward affordable housing in exchange for added density to build its luxury condo tower in the Financial District. But in July, after construction stalled, the developer went before the Boston Planning and Development Agency and asked to reduce the size of the tower and switch plans from condos to rental apartments.”
The Miami Herald in Florida. “The Related Group is best-known for its luxury and market-rate condo towers, with an estimated 80,000 condos built, the bulk of them in Miami-Dade. But with a glut of unsold condos dragging down that market, the company is shifting gears and invested $2.3 billion for a wave of apartment rental buildings — both affordable and market-rate — in Miami-Dade and cities such as Tampa, Orlando, and Fort Myers.”
“This year alone, the company has delivered 3,053 market-rate and 719 affordable/mixed income rentals in Lantana, Palm Beach and Orlando, including another 204 units in the ongoing $300 million Liberty Square renovation project. Because of the glut of apartment rentals built over the last couple of years in the downtown urban core — nearly 6,000 units since 2014, according to the Downtown Development Authority — Related is steering clear of that area except for one project: The first of three planned towers at 444 Brickell, a four-acre site the company bought in 2013 for $104 million, will be a 40-45 story tower with 500 apartment rentals.”
“‘One of the things that’s happening in this marketplace is that while people are more reluctant to purchase a condo in a high-rise, they don’t seem to be that afraid of renting in a high-rise,’ said Bruce M. Goldstein, CEO of the Fort Lauderdale-based BMGA real estate development and brokerage firm. ‘Maybe it’s less of a commitment. But rental projects around the country are very buoyant. While the focus for most developers is new condos, most of them that I know are talking about how many unsold units they have.’”
The Colorado Real Estate Journal. “Apartment development in downtown Denver and adjacent neighborhoods is positioned to place upward pressure on vacancy in the coming quarters. Of the more than 4,000 rentals slated for second-half delivery metrowide, nearly 50% are in downtown/Highlands/Lincoln Park or Five Points/Capitol Hill/Cherry Creek submarkets that each registered triple-digit basis-point increases in vacancy during the second quarter.”
From Bisnow San Francisco on California. “Curtis Development principal Charmaine Curtis. But she said the risk of market-rate development slowing and impact fees disappearing could hamper how much funding the city has to give once funds from sources like 2018’s Proposition C are exhausted.”
“‘The reality is that the city is not collecting a ton of money right now for affordable housing fees,’ Curtis said. ‘With rents having decelerated as much as they have, I just don’t see how there’s going to be a lot of market-rate development of rental housing, or even condos, occurring, with vacancy rates where they are, in the next couple of years at least.’”
From SF Weekly in California. “San Francisco’s notoriously high rents have dropped precipitously over the course of the pandemic, so it’s no surprise to learn that in October, they dipped again. The coming months will tell whether more people coming to work downtown will put an end to the city’s rental market ‘free fall.’”
From Socket Site in California. “Completely remodeled in 2016, the ‘spectacular Noe Valley home’ at 725 Duncan Street, which features ‘stunning Downtown, Bay, and Bridge views, paired with dramatic modern architecture and design,’ sold for $4.1 million in January of 2017. The modern 3,200-square-foot home was then further upgraded. And in June of 2018, the upgraded home returned to the market listed for $4.25 million and re-sold for $4.1 million, representing total appreciation of 0.0 percent since January of 2017 (not accounting for the six-figure cost of the aforementioned upgrades and despite the fact that the ‘median sale price’ in San Francisco was ‘up 29.7 percent!’ overt the same period of time).”
The Georgian Straight in Canada. “In its latest housing report, RBC Economics noted that the real-estate market is awashed with condo supply. According to economist Robert Hogue, ‘condo investors are looking to sell.’ ‘As rents soften and vacancies rise, condo listings are spiking in Toronto, Montreal and Vancouver—albeit from low levels,’ Hogue reported. Meanwhile, ‘Tight downtown condo markets that previously commanded expensive rents are now thick with supply.’”
“Hogue also stated that ‘rent is now declining in Toronto, Montreal and Vancouver, especially in higher density, downtown locations.’ ‘Underlying the shift,’ according to the bank economist is a ‘surge in rental supply as the short-term rental business dries up and new purpose-built rental and condo units are completed.’”
From Yahoo News on Canada. “In less than a year, bidding wars among tenants have been replaced by landlords offering incentives just to fill their units. While immigration is down, a flood of new condos have come up for occupancy, many of them owned by investors who now hold about a third of Toronto’s rentals. Some downtown area rents were down by nearly 17 per cent year over year, reported Urbanation.”
“‘The current level of supply, particularly downtown, would suggest there are further declines in rents that are going to come,’ said Urbanation president Shaun Hildebrand. There are about 5,000 purpose-built rental units expected to be completed next year, the highest number in 25 years, said Hildebrand. Most years, that number would be about 1,000.”
“For the moment, some tenants are getting a break after a very tough market, said real estate broker John Pasalis. ‘A lot of tenants are asking for rent reductions because they’re seeing what (other) units are renting for in their building, so they talk to the landlord and say, ‘Listen, cut my rent by $300 or I’m just going to move three floors up’ he said.”
“Competition for tenants is most severe downtown, said Simeon Papailias of Royal LePage Signature Realty, who manages 80 downtown rentals. COVID-19 has changed the services and workplaces that are operating in-person. ‘Nobody can rent their buildings — there are no students, the restaurants are closed and supporting staff have moved away,’ he said.”
The Globe and Mail. “Canada’s job market is recovering slowly from high unemployment numbers caused by the onset of the pandemic, but for these workers and hundreds of thousands like them, the recovery can’t pick up quickly enough. Steve Hardy, 57, Calgary – ‘I’m a petrographer, so that’s someone who looks at drill cuttings and core for oil and gas exploration, and I’ve been doing it for about 30 years. The third week in March, I got the call saying, ‘We’re letting you go.’ I started looking for work right away. But the job pool is quite slim here in Calgary. I ended up applying to be a school bus driver, and I’m working for them now on a part-time basis.’”
“‘It’s tough when you’re making three digits, and you’re down to two. It’s tough on the family. My wife is working, thank God. We’ve got two kids, one in university and one in high school. We’re scraping by. We have food on the table. We deferred our mortgage payments, but we are selling our house to downsize.’”