A report from The Real Deal on Florida. “The supply of unsold condos is growing in downtown Miami, as the pandemic continues to pummel South Florida’s economy. Greater Downtown Miami has more than 30 months — or two-and-a-half years — of supply of condos, and 100 months — or more than eight years — of supply of luxury units, according to an analysis of Multiple Listing Service data by Condo Vultures Realty. As of Tuesday, there were 3,579 condo listings in Greater Downtown Miami, asking an average price of about $758,000. Meanwhile, the average closing price for the first half of the year was $511,000.”
“The luxury market is faring much worse. Only 36 units sold between January and June, for an average of just six units sold a month. (Units asking at least $1 million are considered luxury.) ‘This is giving me flashbacks to 12 years ago in 2007, when the Miami condo market started to go bad,’ said Peter Zalewski, principal at Condo Vultures Realty. ‘Early indications are that this pandemic combined with the oversupply that already existed is going to turn this into a serious buyer’s market.’”
“Currently, about 600 luxury condos are on the market asking an average price of $2.05 million. Twenty-six luxury condo sales are pending, Condo Vultures’ data shows. It doesn’t help that the shadow rental inventory is also growing, Zalewski said. Individual condo owners who typically rent their units out are faced with a dilemma, he said. ‘Do they continue to pay their mortgage, or do they begin the process of trying to unload early?’ he asked.”
“Zalewski predicts that investors will continue to sell their condos at deep discounts compared to their purchase price, or to the market’s high. It’s already happening throughout South Florida. In July, billionaire hedge fund manager Clifford Asness sold his South Beach penthouse for $22 million, 15 percent less than he paid for it two years ago. ‘The day of the all cash buyer is coming, and coming quickly,’ Zalewski said. ‘Those all cash buyers are not looking to pay market value. They’re not even looking for a discount. They’re looking for a haircut.’”
From Travel Daily News. “A new national report shows that the hotel industry is facing a historic wave of foreclosures as the COVID-19 pandemic continues to devastate small business hotel owners and its workforce. Since the beginning of the pandemic the hotel segment has faced a historic number of delinquencies and is the most heavily hit sector of the commercial mortgage-backed securities (CMBS) market. The report, compiled by Trepp, shows that the percentage of loans that is 30 or more days delinquent is 23.4 percent as of last month—the highest percentage on record. By comparison, the percentage of hotel loans that were 30 or more days delinquent at the end of 2019 was 1.3 percent.”
“From a financial perspective, the report shows that $20.6 billion in hotel CMBS loans were 30 or more days delinquent as of July, compared to $1.15 billion as of December 2019. The highest volume of delinquent hotel loans during the Great Financial Crisis was $13.5 billion. The current percentage of loans that are delinquent now exceeds the highest level during the Great Financial Crisis by 53 percent.”
From Bisnow Washington DC. “The end of the summer is typically one of the busiest periods for College Park hotels, but the pandemic is preventing that activity from happening this year. The Hotel at UMD, a 297-room hotel with 43K SF of meeting space, which opened in 2017, temporarily closed in March and laid off 150 people. Additionally, two out of the four restaurants in the hotel closed, and its Red Door Spa filed for bankruptcy, said Southern Management CEO Suzanne Hillman.”
“‘There is a severe, significant impact on the hotel, and I do not see it coming back quickly,’ Hillman said. ‘People are generally afraid.’”
“National Harbor’s restaurants have also seen their traffic increase during the weekends this summer, said Peterson Cos. CEO Jon Peterson, but they are still facing the difficulties the restaurant industry has experiencing across the country. ‘The reality is not everyone is going to come out the other side of this,’ Peterson said.”
From RE Journals. “Cleveland, like most Midwest cities, was enjoying an active commercial real estate market at the start of 2020. Then came mid-March and the COVID-19 pandemic. ‘It was projected that the bankruptcies we are seeing today would occur over a 10-year period. We didn’t think they’d happen over just 10 weeks,’ said Doug Holtzman, vice president with Anchor Cleveland. ‘For those of us who touch, feel and see retail every day, we knew the antiquated models these retailers were working with. It was just a matter of time before they would have to file for bankruptcy.’”
“Ezra Stark, chief operating officer of Stark Enterprises, said that while the Cleveland multifamily market is solid as a whole, certain submarkets are performing better than others. Downtown Cleveland’s apartment market is sluggish. The reason? There is an oversaturation of development in downtown, something that COVID-19 only exacerbated. Stark said that he expects to see more challenges in the future as Cleveland’s economy continues to struggle as a result of the shutdowns imposed after the pandemic hit.”
“‘We are seeing an increase in concessions now,’ Stark said. ‘We are seeing an overall decrease in demand. It’s going to be a challenging environment for multifamily.’”
From Potrero View in California. “Commercial landlords in Dogpatch have temporarily reduced rent for retail and production, distribution and repair tenants forced to close during shelter-in-place. ‘I’ve heard anecdotally from people who’ve requested reprieves in their rent and they were not given them. It’s a little bit of Russian roulette for the landlord. If you lose that tenant, you might not find a new tenant,’ said Mark Dwight, owner of Rickshaw Bagworks at 904 22nd Street. ‘When I walk around town, the Financial District and Nob Hill, I see so many closed businesses. It’s going to take a while to come back. From ground level, it looks bleak.’”
“Workshop Residences, at 797 22nd Street, recently announced that it was permanently closing, Dwight said. He predicts 40 to 50 percent of San Francisco’s restaurants will go out of business. ‘Ground floor small retail and restaurant will see high vacancy rate,’ said Dwight.”
The Silicon Valley Business Journal in California. “Silicon Valley is expected to double the number of new apartment units added this year compared to the number of those added last year, with apartment construction in the region now at a five-year high, according to RentCafe. That’s based on data referring to apartment buildings with 50 units or more. The report found that the San Jose metropolitan area is projected to add 5,829 new apartment units to its apartment inventory by the end of 2020, more than double the 2,912 new apartment units added to the region by the end of 2019.”
From New York 1. “The annual Rent Guidelines Board vote is a spectacle closely watched by apartment dwellers: the setting of rents for nearly one million units in the city. The rent protections are taken for granted, but the law contains a poison pill: if five percent of the apartments are vacant, the rent regulations end. If the vacancy rate remains below five percent, the protections continue. ‘We’ve seen it fluctuate from two percent up to four, middle fours, but I don’t think it’s ever eclipsed five percent,’ said Jay Martin, the Executive Director of the Community Housing Improvement Program.”
“The Community Housing Improvement Program or CHIP represents landlords who own hundreds of thousands of apartments and says its member survey shows a vacancy rate of nearly 11 percent now up from 3.38% in February. CHIP’s executive director believes if the city conducted a vacancy survey now it would find a vacancy rate above five percent because so many people have left the city or changed their housing situation because of the coronavirus.”
“‘Once the housing vacancy survey is allowed to be conducted we will see some numbers that the city has never seen before,’ said Martin.”
From Real Estate Weekly. “One of New York’s biggest housing groups has accused the federal government of being ‘asleep at the switch’ as thousands of tenants flee the city. The Community Housing Improvement Program (CHIP) says skyrocketing vacancies and unpaid rent is hurting both owners and occupiers. The vacancy rate now stands at 10.78 percent, up from 3.38 percent in February, for our members. Although more pronounced at the high end of the market, CHIP found that the vacancy rate for apartments with rents below $2000 a month has more than doubled, coming in at 7.08 percent in August, up from 3.06 percent in February.”
“‘This indicates that even some of the city’s entry level apartments are not being rented anymore,’ said the group in a statement. ‘CHIP members report that they are significantly cutting rents and offering multiple months of free rent, and are still struggling to attract tenants.’”
“Commenting on the state of the sector, most CHIP members expressed dire concern for the growing number of vacancies in the city. ‘For the first time in 40 years, we have a tremendous oversupply in housing as families are fleeing the city,’ said one survey respondent. ‘Vacancy rates are killing our business. It’s not even pricing – there is a frightening dearth of demand,’ said another. Landlords also fear the pandemic is the death knell for small mom and pop commercial tenants.”
From Gothamist. “As some New Yorkers have long left the city and housing advocates fear an eviction crisis, the rental market itself is showing signs of weakening in Manhattan. A new estimate shows that the median residential rental price in Manhattan dropped 10 percent last month compared to July 2019, according to a report from real estate company Douglas Elliman. In Manhattan, the median rent for an apartment dropped from $3,521 in July 2019 to $3,167 in July 2020, a decline that the report called ‘most significant annual decline in almost nine years of record-keeping.’”
“Nancy Wu, an economist for StreetEasy, wrote that it wouldn’t be surprising to see rents fall even more into spring of next year. Those ‘leaving the city are not being replaced by others moving in. The new hires who typically move to the city are starting their jobs remotely. Fewer students will return to the city in September, when colleges in the city, such as Columbia and CUNY, begin the school year teaching most courses remotely,’ Wu wrote.”