What’s happening now
Another week and another news cycle from Amazon continues on its massive growth path. As you will read in our links below, I am not sure if there is anything more symbolic of our time than Amazon announcing 2,000 jobs in the Lord & Taylor building in NYC, the former headquarters of the oldest department store in New York, to create the USA. Oh, and they bought it from WeWork, which just raised another $ 1.1 billion from Softbank.
This is a positive act that is in stark contrast to another release from Moody’s Analytics that predicts the vacancy rate in the US this year, 2021 and 2022, will reach astronomical highs of 19.3%, 19.9% and will even reach 20%. Unfortunately, this would surpass the previous record high of 19.7% in 1991. It still remains a huge wildcard as to what the long-term effects of remote working will be and how that aligns with the tenant’s need for more social distance space in the workplace.
While cautious optimism in real estate capital and transaction markets persists, many questions remain as to how long it will take for private market prices to adjust to the underlying challenges we still face. Dr. Wharton’s Maisy Wong commented in a webinar earlier this week that private markets are tending to lag public markets by 4 to 6 quarters, suggesting we are not yet seeing the full effects of the crisis, largely mitigated by the massive ones Amount of money the government has pumped into the system.
Something to see
Speaking of allure, no-deal isn’t good news. Congress is not in session and it does not seem that we will make any progress on any meaningful enlargement or any new package in the near future. When looking at the NMHC Rent Tracker until August 13thth The rental collections are about 200 basis points behind the 2019 numbers and are still pretty much sticking to what we’ve seen over the past few months. August is still likely to be a beneficiary of the final increase in unemployment benefits from July, meaning September will be a pretty meaningful month if we don’t have anything new on the economy.
Be on the lookout for an informative podcast with Ivy Zelman of Zelman & Associates next week that took a deep dive into living space and its perspectives. We discussed what parts of this current crisis are accelerating pre-existing trends and where some of these longer-term changes in terms of housing may persist.
Let us know if we should cover something in this newsletter or in the podcast! This is meant to be a resource for anyone who reads, rather than just a place to hike once a week. As always, stay safe out there, wash those hands and we’ll get through this together!
-Adam Hooper, CEO
|Rent Payments Collected By April 13th||90.1%||85.0%|
|Rent Payments Collected By May 13th||89.8%||87.7%|
|Rent Payments Collected By June 13th||88.9%||89.0%|
|Rent Payments Collected By July 13th||90.1%||87.6%|
|Rent Payments Collected By 13 August||88.9%||86.9%|
|Current||Change from the previous week|
|10 years treasury||0.643%||-0.066%|
|Unemployment rate||10.2%.||– –|
|Total US COVID-19 cases||5,595k||+ 337k|
|Total US COVID-19 tests||69,580k||+ 4,970,000|
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Bruce Stachenfeld, Chairman of Duval & Stachenfeld, attended the podcast to discuss his predictions for the real estate industry through discussions with industry experts.
Important articles to read this week
Some hedge funds and private equity firms that lent real estate owners money are now suing them for defaulting on interest payments.
E-commerce giant creates 3,500 jobs; 2,000 will be in the Lord & Taylor building in NYC
Moody’s Analytics is forecasting a vacancy rate in the U.S. to hit a historic high of 19.9% in 2021
National vacancies will rise above historic highs in the next few years.
Reviewing the current conditions, the panellists agreed that the capital markets were very active due to low interest rates and favorable spreads.
CBRE’s new Deal Flow Indicator suggests a recovery from the bottom of the pandemic as the number of confidentiality agreements signed increases.
With unemployment still high and the extended federal benefits now expired, more tenants will struggle to keep up to date in the coming months.
The US private equity giant banned employees from the office for 14 days when using buses or trains for fear of coronavirus
Fund manager Carlyle Group is urging employees to avoid public transportation when offices reopen to prevent the spread of coronavirus.
E-commerce giant Amazon will open an office with 2,000 employees in the former Lord & Taylor flagship on Fifth Avenue, the company announced this morning.
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