While I have written about the issues facing residential renters that is a double edged problem as some owners are small scale landlords with one or two investment properties that rent is the primary financial investment to pay the mortgages, taxes and incidental costs required to maintain and own investment properties. In 2008 many single investors bought numerous properties with the intent of owning as a method of long term investment and when that market collapsed it led many tenants in the lurch as banks foreclosed or the property was sold to larger REIT venture capitalists in which to again refurbish and resell or use as rental markets demanded including short term/Airbnb use. That too is another fallout post Covid for the small investor who are now listing furnished properties for rent with shorter leases in anticipation for the long term while others are simply moving to the more traditional means or trying to sell them. And once again the venture capitalists are quickly buying up such properties as well for their own long term gain.

That said the multiple family units be they condos or apartments are a market I have yet to see what will result as again I suspect many residents will want out of such hot boxes of confinement due to costs, lack of space and simply fewer demands to distance upon entering or exiting the property. The building behind me is one such example as an albatross that they stupidly accelerated and now will have multiple expensive units in which will go vacant for I suspect quite some time.

This from Forbes:  According to RealPage, about 370,000 new high-end units are to reach competition this year (although construction delays and disruptions could deflate this number), marking a 50% increase from the national supply that came online in 2019. 

“We have too much product that was either just completed or under construction and you're not going to have people moving around as much as [it would be otherwise] typical in the near term,” says Willett. “It's going be really hard to get that new product filled up.”

For the summer months, which usually see a peak in rental demand, it’s still hard to tell what the effects will be, despite the impacts already rippling throughout the industry.

“Everybody's wondering what this all means for the summer leasing season,” says Robert Pinnegar, CEO of the National Apartment Association. “Traditionally, the summer period is when you see the most movement of people from property to property, from state to state, from city to the city.


“With the uncertainty that's going on now, especially with the economy essentially being at a standstill, nobody really knows what that's going to do. And the unknown factor here is what government policy is going to be with regards to how we interact when the businesses reopen.”

And if working from home becomes the norm it may mean larger plans other than just redesign and scheduling staffing needs for many companies as it too will have a ripple affect and nowhere will feel it more than Manhattan.

Which brings me to the issue of commercial properties which have been on the upswing in most markets, while housing lagged, this is one area of build that has not. Crane watch became the mantra of most business journals under some misguided (intentionally or not) to sell and market their cities to businesses in which to relocate their operations. Along with massive tax incentives that enables business to not pay income nor other revenue generating taxes for decades it become an inticing invite to enable business to hopscotch across America while small business are given no such breaks and they continue to generate the most jobs and in turn revenue to the state coffers. Then came Covid and that game changed.

Small business owners closed are already struggling with rent and now the added lootings we may see more closures and in turn that will affect overall taxes and mortgage burdens.   But it is not only the small businesses.

This from the Washington Post:   Nearly half of commercial retail rents were not paid in May. Companies as big as Starbucks say the financial devastation from the shutdown has left them unable to pay their full property bills on time. Some companies warn they will not be able to pay rent for months. And this from the New York Times:  If building owners cannot come up with enough money to pay their next property tax bill in five weeks, a deadline the city has refused to postpone, the city will be starved of an enormous revenue stream that helps pay for all aspects of everyday life, from the Fire Department to trash pickup to the public hospitals. It could lead to a bleak landscape of vacant storefronts and streets sapped of their energy.

But again like residential rents, commercial ones are not doing much to re-examine their balance sheets and rental agreements. This is from one such store owner in New York:  In 2018, even the national chains began closing more spaces than they opened. Rents have come down somewhat in a few heavy shopping arteries, but on the streets where I was looking to open stores, rents didn’t seem to budge. In 2019, rent for my NoLIta store jumped from $360,000 a year to $650,000.

And I laugh at the once adored WeWork that had everyone salivating at their "worth" that fell hard and fast before Covid and now it too has been infected with LayOff mentality and demands to reduce rents.

This is one new road we are going down and it sure as hell is like the rest of our infrastructure, rocky, bumpy and full of holes.



Office Towers Are Still Going Up, but Who Will Fill Them?

Developers around the country are grappling with the fallout from the coronavirus pandemic as tenants cancel plans and workers fear returning to the office.


The New York Times
By Kevin Williams
Published June 2, 2020


Before the pandemic shut down businesses, a robust economy had powered a building boom, sending office towers skyward in urban areas across the United States. The coronavirus outbreak, though, has scrambled plans and sent jitters through the real estate industry.

Skyscrapers scheduled to open this year will remake skylines in cities like Milwaukee, Nashville and Salt Lake City. Office vacancy rates, following a decade-long trend, had shrunk to 9.7 percent at the end of the third quarter of 2019, compared with 13 percent in the third quarter of 2010, according to Deloitte.

Developers were confident that the demand would remain strong. But the pandemic darkened the picture.

“There is a pause occurring as companies more broadly consider their real estate needs,” said Jim Berry, Deloitte’s U.S. real estate sector leader.

The timing is unfortunate for Mark F. Irgens, whose 25-story BMO Tower in Milwaukee opened in mid-April at the peak of the statewide lockdown in Wisconsin. A month later, a small fraction of typical daytime foot traffic was passing by as most businesses adhered to the governor’s stay-at-home directive, which expired last week. A restaurant that was slated for the ground level was canceled, and three potential tenants have delayed their plans.

Instead of showing off the building’s sparkling Italian marble floors and panoramic vistas of Lake Michigan, Mr. Irgens is worrying about who is going to pull out next and what type of corporate landscape he might face when the pandemic finally ends.

But he is not putting on the brakes. The BMO had been planned for five years, and he has leases to negotiate, investors to please, tenants to woo and loans to pay off.

“Development projects are different than making widgets,” he said. “You can’t stop; you can’t turn it off. You have to continue.”

Slowly, workers are filling their BMO offices. Managers, who were scheduled to report on Monday, constitute about 15 percent of the building’s occupancy. Mr. Irgens thinks it will be the end of the summer before it gets up to 50 percent. Without a coronavirus vaccine, it may be year’s end before the building approaches a “normal” occupancy, he said.

Other developers around the country are also dealing with the fallout, especially for towers with Class A space, regarded as the highest-quality real estate on the market. In most cases, new buildings are not fully occupied, and developers were counting on a strong economy to do the work for them. For instance, the BMO Tower was 55 percent leased before the pandemic.

The question facing the owners of office towers is: Will anyone still want the space when coronavirus crisis fades?

If the economic pain drags on, there could be long-lasting changes to the way people work and how tenants want offices to be reimagined, said Joseph L. Pagliari Jr., clinical professor of real estate at the University of Chicago’s Booth School of Business. Some of the changes — like more spacious elevators — could be costly to put into place, he said.

The pandemic could be a “pivot point,” Mr. Pagliari said, and that would be bad news for building owners. The office towers were designed to be “best in class,” he said, but the pandemic has suddenly made their most salable amenities — common areas, fitness centers and food courts — into potential liabilities.

The economic crisis could also spur high interest rates on debt, which would cause building values to fall, Mr. Pagliari said. That may happen even if the crisis diminishes in the weeks ahead.

“The current pandemic has raised perceptions about the likelihood and consequences of future pandemics,” Mr. Pagliari said. Developers who can factor in such events will gain an advantage, but any skyscrapers that are built with pandemic fears in mind are years away.

The prospect that workers may want to continue working from home does not worry John O’Donnell, the chief executive of Riverside Investment and Development, which is developing a 55-story tower at 110 North Wacker Drive in Chicago. The tallest office building erected in the city since 1990, it is scheduled to open in August and will be anchored by Bank of America. Other tenants include law firms, many of which are doing business from home.

“There is a need for collaboration, team building, common business cultures and a continuous desire to have social contact within a business,” Mr. O’Donnell said.

The building is 80 percent leased ahead of its August opening. One tenant signed for 40,000 square feet of office space at the height of the lockdown, which Mr. O’Donnell took as an encouraging sign.

The building is already being adjusted to meet post-pandemic needs, something Mr. O’Donnell said newer structures were better able to do. Amenities are being updated to be touch free. And owners are talking with tenants about walk-through thermal imaging to monitor workers and visitors for fevers.

The pandemic will result in a demand for more office space, not less, said Paul H. Layne, the chief executive of the Howard Hughes Corporation, a national commercial real estate developer based in Houston. Developers will move away from the industry-standard 125 square feet per person toward roomier workplaces.

But others say it is too early to tell when demand for office space will return. Jamil Alam, managing principal of Endeavor Real Estate Group, said the situation would vary by city.

“There will be winners and losers,” Mr. Alam said, explaining that he thinks denser metro areas like New York and Boston, which have been ravaged by the coronavirus, could find their luster lost in favor of smaller markets.

Endeavor, which is based in Austin, Texas, has a portfolio that includes 15.6 million square feet of commercial real estate in cities like Dallas, Denver and Nashville. One of its projects, the 20-story Gulch Union, will be the largest office tower in Nashville when it opens in August with 324,254 square feet of office space.

Smaller markets like Nashville are well positioned for companies wishing to pull up stakes from major metropolitan areas with higher density and costs, Mr. Alam said. Gulch Union has leased 27,000 square feet, and four more deals totaling 40,000 square feet are near completion.

“Deals are still being done,” he said.

There will be an appetite for urban, walkable, mixed-use office environments, Mr. Alam said, and changes will need to be made in buildings over time, like fewer touch points on handles and elevator buttons.

But projects that have not been started yet will be paused, said Chris Kirk, managing principal of the Salt Lake City office of Colliers, the commercial real estate brokerage firm.

“If you are a developer or landlord or C.F.O., you are concerned,” he said. “Everyone is feeling the impact.”

And the city is experiencing a building spurt downtown. A 24-story Class A tower developed by City Creek Reserve, the development arm of the Church of Jesus Christ of Latter-day Saints, is scheduled for completion next year. The building, which will have 589,945 square feet of office space, is already 80 percent leased.

Salt Lake City has been averaging a new Class A office high-rise every decade, and the pace is increasing. Still, the pandemic might put the brakes on that.

“Anyone who would be coming out of ground speculatively now without the commitment has got to be thinking about their timing,” Mr. Kirk said.

Mr. Irgens hopes to ride out the pandemic and continue with other projects. In February, his company broke ground on a six-story building in Tempe, Ariz., and it is moving forward with a 235,000-square-foot Milwaukee office project that is 42 percent leased.

“My partners in my business are working really hard to figure out how to have business continuity, and it is really hard to do that,” he said. “Things are changing daily.”