A weekend topic starting with USA Today. “‘It was looking pretty bleak pre-Covid because of the transition away from bricks and mortar,’ said Manus Clancy, senior managing director at Trepp LLC. ‘We will see dozens and dozens of loans go into default and lenders will only be able to recover 30 cents on the dollar.’”
“Owners of retail properties, especially owners of second- and third-tier malls that have lost their anchor tenants, will get crushed. Some of those malls, which were once valued at $150 million, may get repurchased by a company like Namdar Realty Group for $30 million. In big cities, storefronts are not as likely to be repurposed. Overpriced properties will simply change hands and rents will come down, Clancy said. ‘The market may come back, but it will come back at a much lower price per square foot,’ Clancy said. ‘Two-mall cities will become one-mall cities.’”
“‘The hotel industry has been devastated by this pandemic,’ said Stephen Michels, the managing director for Cushman & Wakefield’s hospitality practice. ‘The combined impact has been greater than 9/11 and the financial crisis combined. It’s been very painful for a lot of owners.’ This, in turn, led to 738 borrowers defaulting on hotel loans backed by about $17 billion in bonds as of Oct 31, according to Trepp LLC. Coast to coast, more than a thousand hotel and retail borrowers have defaulted on more than $35 billion in loans since the coronavirus pandemic.”
From Forbes. “My analysis of research from Apartment List (downloads required) for the year ending September 2020 shows that asking rents in the California cities of San Francisco, San Jose and Oakland declined by a rate of 20.4%, 9.8% and 9.3%, respectively. According to our look at CoStar data, the vacancy rate in Downtown Minneapolis is now 13.4% (compared to 6.1% across the Twin Cities) and even 10.3% in San Francisco (up from 5.6% last year).”
“Instead of a race to the bottom in rents to attract people, there is simply a lack of demand that can’t easily be increased, even by drastic changes in price. Three months free on a 15-month lease is a 20% discount. Two months free on a 12-month lease is a 17% discount. These discounts should create enthusiasm and interest for a renter. For an owner, these steep price drops should quell any concern over rising vacancy. However, they’re not having the intended effect.”
The Star Tribune in Minnesota. “A glut of empty apartments in downtown Minneapolis and St. Paul and other parts of the Twin Cities metro means slightly lower rents and a raft of enticements for willing renters. Brent Wittenberg, vice president at Marquette, said the quarter-to-quarter decline in rents wasn’t a surprise, but occupancy overall held up better than anticipated. ‘But that is changing,’ he said. ‘We expect a more significant increase in vacancy in the fourth quarter.’”
From Bisnow New York. “Owners of New York City real estate, whose taxes make up a sizable portion of the city’s revenue, are gearing up for a possible fight with the Tax Commission next year as the impact of the pandemic continues to wreak havoc on the local economy. Joel Marcus, an attorney at Marcus & Pollack who specializes in tax certiorari, a term which refers to the process in which owners appeal their property assessments, said he has some clients now claiming properties are worth around 50% less than before — and while most have accepted there will be no ability to shift this year’s payments, Marcus expects many will be arguing to pay less tax next year.”
From PIX 11 on New York. “Free parking, free gym memberships, even free rent for three months. Manhattan rents have hit their lowest levels in nearly a decade. Agent Nicole Beauchamp of Engel & Vokers said what’s happening is unprecedented. The latest report from realtor Douglass Elliman found that the median price of a Manhattan apartment last month was $3,100, down from $3,500 last October. The savings are even steeper for smaller apartments.”
“‘We’ve seen a 19% decrease in the prices of studios,’ said Beauchamp. ‘I have never seen this amount of landlord concessions, and they have actually increased from the summer.’”
From Loudoun Now. “Centennial Advisory Services announced it has taken over management of the Dulles Town Center, an announcement that followed the Oct. 22 foreclosure on the regional mall Lerner Enterprises built and has operated for two decades. County assessment records show Dulles Town Center was valued at $300 million in 2008. A decade later in 2018, the assessed value had dropped to $183.6 million. Following the recording of the deed of foreclosure, the value is listed at $55 million.”
The Puget Sound Business Journal in Washington. “A longtime Seattle commercial property owner says he is selling over $100 million in assets in the Georgetown neighborhood due to how the city is handling homelessness. Larry Russak’s grandfather started buying investment properties in 1910, ultimately accumulating a portfolio that included large industrial buildings in Georgetown, the gritty blue-collar district that seems a world away from the gleaming office towers downtown five miles to the north. Russak said he doesn’t feel unsafe. He’s just tired of the situation.”
“He said he has been selling properties for a couple of years, ‘ever since the city started doing the crap they’ve been doing.’ ‘The city of Seattle just doesn’t give a damn anymore. There’s nobody to talk to,’ he said.”
From CBS Los Angeles in California. “According to a new rent report by ApartmentGuide, rents in L.A. have dropped during the pandemic 18%. In areas a little farther out, like Long Beach, rents have dipped more than 30% since this time last year. ‘Prices are lower because there is not as much demand,’ said Brian Carberry, ApartmentGuide senior managing editor. ‘There is not as many people moving, and property owners are trying to entice people, so they are lowering prices.’”
“Rene says many of her friends have given up their apartments. ‘A lot of my friends have left the state, left the city. I have a lot of musician friends who have moved back home,’ she said. And in Northridge near CSUN, Rene says she has seen some rental steals. ‘Some places have twenty available apartments in one building,’ she added.”
From Patch Los Gatos in California. “In Suburban Silicon Valley, rents have fallen at a comparable pace to that which big cities are experiencing, The Mercury News reports. San Mateo has seen rents fall 9 percent since January, the report said. Rents have plunged 13 percent in Redwood City in 2020. Santa Clara rents have fallen 11 percent this year and in Milpitas 7 percent according to the report. In Mountain View and Sunnyvale rents have dropped 14 percent.”
“Igor Popov, chief economist at Apartment List, told The Mercury News the outlook for Silicon Valley rental costs is especially uncertain. ‘Every company is trying to figure out what their long-term approach to work is going to be,’ Popov said. ‘The deeper you get into Silicon Valley, the more of a real issue it is.’”
The Potrero View in California. “San Francisco rents have dropped faster than any other major city in the country. According to Zumper’s October rent report, rents in the City have declined by 20 percent since last year. A 15-year veteran of San Francisco’s residential property management sector, who is currently a portfolio manager at a company that oversees 4,000 rental properties in the City, also pointed to the homeless epidemic as a problem that continues to dampen San Francisco rental prices. Public health policies have worsened the situation, resulting in larger, more permanent, encampments. SoMa has been especially affected; previously desirable properties have been rendered unrentable by a nearby encampment.”
“Two apartments in one building that would’ve rented quickly had two viewers in two months, despite 30 percent rent reductions. ‘I cannot get people to come by, because of the encampment’ reported the portfolio manager.”
“Growing vacancies have prompted incentives by property owners, such as offering a month or two of free rent, cash rebates or gift cards. However, the portfolio manager finds this trend problematical, as it takes landlords into legally troubled waters, a view shared by Daniel Stern, principal at the real estate law firm, Wasserman-Stern. Stern noted that the San Francisco Rent Board and local courts have found that inducements are generally considered a reduction in a tenant’s base rent; under rent control law landlords cannot later raise rents from these discounted levels.”
“‘Landlords are doing it anyway…out of desperation,’ said Stern.”
From Blog TO in Canada. “There’s never been a better time to be in the market for a ‘micro-condo’” in downtown Toronto — or a worse time to live in one, I’m afraid. Once hailed as the future of downtown real estate, these ultra-tiny, sky-high units — some so small that they can’t fit ovens — were immensely popular in Toronto two years ago, when vacancy rates were at historic lows and rent prices were skyrocketing.”
“Now, thanks to the pandemic and all of the various lifestyle changes it has inspired, realtors are having trouble selling off anything less than 500 square feet — let alone getting contracts signed for piddly pre-construction pads. Last October, condos larger than 2,000 square feet led the pack in terms of available supply across the GTA. This October, units smaller than 500 square feet are far and above the most oversupplied, followed by units between 500 and 600 square feet.”
“‘The most oversupplied units in the condo market today are units that are smaller than 600sq ft. In fact, these units are more oversupplied and harder to sell than units that are over 2,000 sq ft in size which tend to be in the luxury segment,’ wrote real estate broker and prolific data analyst John Pasalis. ‘If you’re looking to buy a condo that is smaller than 500 sq ft, the supply of units significantly exceeds demand today.’”