$32M island property listed on Miami’s ‘billionaire bunker’

$32M island property listed on Miami's 'billionaire bunker'

The vacant waterfront lot owned by Julio Iglesias

A rare empty lot on a private island community off Miami known as the “billionaire bunker” has hit the market with the price listed at $31.8 million.

The 1.8-acre waterfront lot is located on Indian Creek Island, a 294-acre manmade barrier island in Biscayne Bay, which contains a guard-gated community with just a few dozen homes and an exclusive golf club. Every property on the island sits on the water.

This waterfront lot on an exclusive island near Miami is listed for $31.8 million. (Photo courtesy of The Jills Zeder Group)

This property includes 200 feet of water frontage according to the listing with Jill Eber and Jill Hertzberg of The Jills Zeder Group, Coldwell Banker Realty. It also features “breathtaking sunset views,” according to the listing.

The property last sold in 2014 for $21.6 million, county property records show. The owner is Julio Iglesias, the Spanish singer and father of Enrique Iglesias, the Miami Herald reported.

This waterfront lot on an exclusive island near Miami is listed for $31.8 million. (Photo courtesy of The Jills Zeder Group)

He previously listed four lots on the island for sale for a combined $150 million, according to the report.

The island has fewer than 100 residents, according to the U.S. Census. The village of Indian Creek still has its own 13-member police department stationed beside the gated bridge. There’s also a 24/7 armed boat patrol, according to the listing.

This waterfront lot on an exclusive island near Miami is listed for $31.8 million. (Photo courtesy of The Jills Zeder Group)

Thirty-seven owners hold the 41 lots on the island, according to the village government. There were 31 homes on the island at the end of 2019, as well as the 6,662-yard golf course and clubhouse

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At first, some who took the mortgage bailout didn’t need it, but now most do

At first, some who took the mortgage bailout didn’t need it, but now most do

KEY POINTS
  • Of the 4.25 million homeowners who were in forbearance at the end of April, nearly half of them actually made their monthly mortgage payment anyway.
  • This new data jibes with a recent survey by Lending Tree that found just 5% of those approved for mortgage forbearance said they wouldn’t have been able to pay their mortgage without it.
A foreclosure sign in front of a house in 2007.
A foreclosure sign in front of a house in 2007. Getty Images
 

As of this week, 4.75 million homeowners are in government or private sector mortgage forbearance programs, according to Black Knight. That is equivalent to 9% of all mortgages outstanding. New analysis, however, shows a large share of these borrowers initially didn’t need the bailout, but now more do. 

These forbearance programs, most of which are on government-backed loans, allow borrowers to miss monthly payments for at least three months. Those payments must be made up in the future through various options. 

 

While the number of new borrowers entering the plan has slowed dramatically since the start of the programs in early April, Black Knight found a surprising twist in the data: Of the 4.25 million homeowners who were in forbearance at the end of April, nearly half of them actually made their monthly mortgage payment anyway, while 54% did not.

Things changed significantly, however, in May. As of May 19, just 21% of those in forbearance plans had made their May payments. This means that about 1.4 million homeowners who were in forbearance but made their April payments are now at risk of becoming delinquent on their loans in May. This explains why the national delinquency rate, which did make an unprecedented monthly jump in April was not as high as expected.

“The fact that only 54% of borrowers in forbearance actually missed their payments helps explain the disparity between April’s delinquency and forbearance rates,” said Anthony Jabbour, CEO of Black Knight. “However, just 21% of borrowers in forbearance have made their May payments, which could lead to another sharp increase in the national delinquency rate for May if those payments are not received before the end of the month.”

We’re not seeing a decline in home prices: Coldwell Banker Real Estate CEO
 

It may have been that some borrowers were using the forbearance program as a safety net, just in case they were to lose their jobs. Some made partial mortgage payments, so as not to run up their debt.  

This new data jibes with a recent survey by Lending Tree that found just 5% of those approved for mortgage forbearance said they wouldn’t have been able to pay their mortgage without it. About 1 in 4 said they could have paid their mortgages, but would’ve needed to skip other essential bills. Nearly 70%, however, said they simply got forbearance because they, “wanted to enjoy some time off from their normal payments,” according to the report. Three out of 4 said they felt at least somewhat guilty about that.

 

When the government’s program was announced, through the CARES Act, the federal coronavirus relief package, there was an outcry in the industry because the guidelines specifically stated that borrowers did not need to prove any financial hardship. No paperwork was necessary. They simply had to tell their servicers that they needed help.

In an interview April 1, as the bailout was being rolled out, Mark Calabria, director of the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, actually pleaded to consumers not to game the system.

“We’re operating on the honor system. We are asking and we’re putting together a script for servicers. This is supposed to be limited to if you’ve lost your job, you’ve lost income,” said Calabria. “Please, if you haven’t lost your job, continue paying. If you can pay your mortgage please do so because we really need to focus on the people who can’t.”

Calabria underestimated the number of borrowers who would ask for forbearance, saying he expected it to rise to 2 million by the end of May. It is now more than twice that and rising.

The 4.75 million mortgages in forbearance plans, represent just more than $1 trillion in unpaid principal balances. An estimated 7.1% of all GSE-backed loans and 12.6% of FHA/VA mortgages are now in forbearance. While the number of borrowers in active forbearance increased by just 93,000 in the past week, far higher than the 325,000 rise in the first week of May, volume has started to tick up again slightly.


Written By:
Diana Olick@IN/DIANAOLICK@DIANAOLICKCNBC@DIANAOLICK

For CNBC

April home sales plunge almost 18%, largest decline in a decade

April home sales plunge almost 18%, largest decline in a decade

Economists surveyed by Refinitiv had predicted existing home sales would decrease 18.9 percent in April

The coronavirus pandemic triggered the biggest drop in U.S. home sales in nearly a decade last month.

Sales of existing homes fell 17.8 percent month to month in April — overall 17.2 percent lower than last year, according to the National Association of Realtors. That puts the annualized pace at 4.33 million units, the slowest since September 2011.

The drop in closings is the biggest one-month decline since July 2010.

Economists surveyed by Refinitiv had predicted existing home sales would decrease 18.9 percent in April.

“The economic lockdowns – occurring from mid-March through April in most states – have temporarily disrupted home sales,” Lawrence Yun, a National Association of Realtors economist, said in a statement. “But the listings that are on the market are still attracting buyers and boosting home prices.”

The supply of homes for sale fell 19.7 percent from the year-ago period to 1.47 million units for sale at the end of April. The lack of inventory pushed the median existing-home price to $286,800, a 7.4 percent increase from last April. Prices increased in every region, according to the survey.Record-low mortgage rates are likely to remain in place for the rest of the year, and will be the key factor driving housing demand as state economies steadily reopen,” Yun said. “Still, more listings and increased home construction will be needed to tame price growth.”

The April data also revealed a shift away from condominiums to single-family homes — a trend that could be reflective of Americans’ desire to escape urban areas for more spacious homes.

Existing condominium and co-op sales fell 26.4 percent from March and dropped 31.6 percent from a year ago. The median existing condo price was $267,200 in April, an increase of 7.1 percent from last year.


“There appears to be a shift in preference for single-family homes over condominium dwellings,” Yun said. “This trend could be long-lasting as remote work and larger housing needs will become widely prevalent even after we emerge from this pandemic.”

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Victoria’s Secret parent company L Brands set to close 250 stores, and that could just be the start

Victoria’s Secret parent company L Brands set to close 250 stores, and that could just be the start

 
  • As of May 2, L Brands was operating 1,070 Victoria’s Secret and Pink locations in North America. 
  • During the first quarter, L Brands’ net sales tumbled 37% to $1.65 billion from $2.63 billion a year ago. 
A woman wearing a protective mask passes a homeless person during the coronavirus pandemic on May 12 2020 in New York City.
A woman wearing a protective mask passes a homeless person during the coronavirus pandemic on May 12 2020 in New York City.
John Lamparski | Getty Images

Victoria’s Secret’s parent company L Brands is about to shut more than 200 stores in malls and shopping centers across the country this year. And it expects even more closures for its struggling bra business are looming. 

When it released its fiscal first-quarter earnings Wednesday evening, the Ohio-headquartered retailer said it plans to shut permanently about 250 Victoria’s Secret and Pink stores in the U.S. and Canada in 2020, or roughly a quarter of its shops in North America. It also is planning to close 50 Bath & Body Works shops for good this year, or about 3% of that business in North America. 

 

But that is just the beginning of the rout. L Brands’ business was floundering before the coronavirus pandemic, but when its stores were forced shut, its troubles worsened.

“We think there will be more store rationalization over the next several years as well,” interim Victoria’s Secret CEO Stuart Burgdoerfer said Thursday morning during a call with analysts. 

“We would expect to have a meaningful number of additional store closures beyond the 250 that we’re pursuing this year … meaning there will be more in 2021 and probably a bit more in 2022,” he added, declining to put a number to those years. 

A spokesperson for L Brands further declined to provide a list of the locations set to close this year. 

As of May 2, L Brands was operating 1,070 Victoria’s Secret and Pink locations in North America, according to its website. 

 

During the first quarter, L Brands’ net sales tumbled 37% to $1.65 billion from $2.63 billion a year ago. Victoria’s Secret’s same-store sales were down 13%, while they surged 41% at Bath & Body Works. 

L Brands is facing additional pressures after its plans to sell a controlling stake in Victoria’s Secret to private-equity firm Sycamore Partners were shattered because of the Covid-19 crisis. 

It said this week that it still aims to make Bath & Body Works a “pure-play public company,” with Victoria’s Secret operating as another standalone business. 

L Brands said it is currently talking to its landlords about the 250 closures slated for 2020. And this will add to a glut of retail real estate going back on the market. J.C. Penney is planning to close more than 240 stores as part of its bankruptcy proceedings. Pier 1 Imports is liquidating its business. Nordstrom is closing 16 department stores because of the Covid-19 crisis. 

L Brands shares were up more than 16% Thursday morning. The stock has dropped about 21% this year. L Brands has a market cap of about $3.9 billion.

Author: Lauren Thomas@LAURENTHOMAS
at https://www.cnbc.com/

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How will Coronavirus affect commercial real estate values?

How will coronavirus affect commercial real estate values?

How will commercial rents be impacted and at what return percentage will the market place settle? Pre-COVID found yield requirements in the 4.5-5% range. Now it’s anybody’s guess. (iStockphoto)
_________________

As California’s stay-at-home order is slowly lifted, our economic activity – placed into a self-induced coma – is also emerging from the ether. The most common question we hear these days is “what is my building worth?”

As recently mentioned in this space, no one really knows. For an investor value depends on the capitalized net income of rents. An occupant? The price of utility with which an occupant’s operation relies.

In the former, how will rents be impacted and at what return percentage will the market place settle? Pre-COVID found yield requirements in the 4.5-5% range. Now it’s anybody’s guess. In the latter? Will business failures cause a greater supply of functional locations from which to transact?

Today, I will take a deeper dive – anecdotally – into where commercial real estate values may be headed. Spoiler alert. In this columnist’s opinion, don’t look up.

Investors – capitalized net income: Those who rely on rents generated from commercial real estate approach value differently than residents of their business locations.

Let’s use this simple example. If annual net rents are $12 and the market return for this income is 5% – the resulting price per square foot is $240 – $12 divided by .05. As you can gather, a change in rents can skew the net income.

If returns are no longer 5% but hop to 6.5%, there’s a decline in the results. Again, annual net rents dropping to $10 with a 6.5% return yields a capitalized value of $153 per square foot. Wow! That is a precipitous fall.

In reality, the analysis is a bit more complex as things such as length of the lease, credit of the tenant and sustainability of the income are considered.

But simply a decline in rent or an increase in the market return spells doom for the worth of commercial real estate.

A couple of weeks ago, an investor friend of mine shared with me a conversation he had with a tenant. Approaching a lease renewal pre-virus he and his occupant were discussing a rate of $1.10 per square foot or $13.20 per year. Unable to reach agreement, they hit pause as the virus overtook our society. Eventually, they settled at 90 cents per square foot.

Simply waiting 45 days saved the tenant 20 cents per square foot. As the investor will not be selling – thus the decline in value will not be realized – he will nonetheless receive significantly less income. This illustrates how rents may adjust in the weeks ahead.

Additionally, if a vacancy is marketed and takers are few. an owner might sharpen his pencil to lease the space. Yep! Another data point for rent reduction. As these new comps filter through our industry, rates will reset.

Owner-occupants – utility: Most who own and occupy commercial real estate with their business don’t speak the foreign language of capitalized net income.

You see, the value they place on commercial real estate relies more on their use of the location and the corresponding payment for that utility. Consequently, if a cheap building has crappy loading, insufficient power or is miles from the freeway very few suitors will surface making it worthless to most occupants.

Making, shipping or servicing goods carries a profit structure independent of the buildin’gs worth. Sure, real estate has its place in the cost structure of said products, but ultimately whether that expense is a rent check to a landlord or debt service to a lender is immaterial. The ordinary business expense is the same.

I know, I know. There are infinite tax benefits to paying yourself rent vs. a landlord but that’s a conversation for another column.

Typically, if space is needed, the local inventory of available buildings will be scanned, toured and analyzed. Culled will be those not fitting the amenity requirements.

Considered? What rent will be paid if leased vs. what will a mortgage payment harbor. Simply, value for an occupant is largely determined by the number of avails that correspond with the needs.

Corresponding interest rates from which a location may be financed? Sure! Low rates can bridge the divide between the price to rent vs own. But, ultimately the location MUST have the goodies.

https://www.ocregister.com/

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104.


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New York City rents likely to go lower due to coronavirus crisis, says real estate appraiser

New York City rents likely to go lower due to coronavirus crisis, says real estate appraiser

KEY POINTS
  • Rental prices in New York City could be heading lower as landlords try to get new leases signed, the CEO of real estate appraiser Miller Samuel told CNBC.
  • Lower rents is also happening on the renewals side, Jonathan Miller said. 
  • The latest monthly report from Miller Samuel and property group Douglas Elliman showed a 71% plunge in new Manhattan leases in April.
The setting sun reflects off One World Trade Center and the skyline of lower Manhattan in New York City as the moon rises on March 7, 2020 as seen from Jersey City, New Jersey.
The setting sun reflects off One World Trade Center and the skyline of lower Manhattan in New York City as the moon rises on March 7, 2020 as seen from Jersey City, New Jersey.
Gary Hershorn | Getty Images
 

Rental prices in New York City could be heading lower as landlords try to get prospective tenants to sign new leases, the CEO of real estate appraiser Miller Samuel told CNBC.

“It’s already in process,” said Jonathan Miller. “It’s happening on the renewals side,” too.

Hal Gavzie, executive manager of leasing for property group Douglas Elliman, told CNBC that landlords are offering concessions, such as waiving security deposits, and they’re being more flexible with renewals to try to keep people from leaving the city, which has been hit hard by the coronavirus pandemic.

The latest monthly report from Douglas Elliman and Miller Samuel showed a 71% plunge in Manhattan new leases in April from a year earlier.

Those massive declines in new leases stem from factors including quarantines that prevent people from seeing new apartments or because their have lost their jobs.

Gavzie said the environment looks like it could be similar to the financial crisis in 2008 and 2009, though he cautioned that it’s too early to be sure. The vacancy rate in April climbed to its highest level in 14 years, according to the data.

The drop in new leases, however, is only part of the picture, Miller said. “In a building, about two-thirds of apartments are renewals, and a third are new leases.”

 

“When you have a drop in new leases, you have a surge in renewals,” he added. “So the action is here, but it’s not public-facing. Landlords are negotiating with their tenants [and] they’re maintaining occupancy.”

The high number of renewals could be why, at the same time, Manhattan saw the highest rental prices ever: The average rental price in Manhattan was up over 7% from April 2019, according to Douglas Elliman-Miller Samuel data. Rental price per square foot also rose 9% to a record high of $72.02. Those rental prices are tied to the public-facing information from new leases, not the private renewals.

“Rents have been rising strongly for the past year, that’s nothing new,” Miller said. “What is new is that there are far fewer public-facing transactions happening right now.”

“As a result, we’re seeing an uptick in vacancy.”

The number of open apartments in Manhattan is nearing a high, according to the report, which may be partly due to the pandemic accelerating the trend of city-dwellers fleeing for the suburbs.

The activity in suburban markets outside New York City is not yet showing an increase in movement from city, but there’s been an uptick in inquiries, said Miller.

Gavzie said he’s seen some relocation companies extending their employees’ stay-at-home policies until September, meaning agents won’t be showing apartments in person for a while.

However, he said, “I’m optimistic that once agents are able to show apartments, rental agents will be very busy.” He added, “I would expect to see a decent surge in rental activity, but still well below last year’s same period.

Author: Anjali Sundaram

https://www.cnbc.com/

 

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Commercial property buyers are watching for deals following the pandemic

Commercial property buyers are watching for deals following the pandemic

After more than 50 years in the real estate business, Craig Hall has gone through markets good and bad. Even in the down times, he has found opportunities.

He’s already scouting for deals that will result from the current pandemic. “There will be a lot of opportunities, and there is room for a lot of players,” Hall said.

Rather than buying properties, his Dallas-based Hall Group is gearing up to buy problem debt from lenders.

“Banks don’t want to deal with property workouts,” Hall said. “They don’t want to be in bankruptcies and foreclosures. A lot of banks would rather sell a portfolio of mortgages. We think that is going to be a good opportunity for us.”

As much as 20% of investment properties financed with commercial mortgage-backed securities are expected to wind up in default.

Hall expects to see some bargains in the hotel market, which has been hardest hit by the pandemic and economic shutdown.

But right now, he said, it’s too early to try to buy most properties outright.

“Nobody knows how to price it,” Hall said. “There’s a disconnect between what a seller wants to get out of it and what a buyer is willing to pay, and there’s no real financing market.”

Recession or depression?

Hall said that the economic downturn brought on by the pandemic will create property market conditions close to what he saw in the 1980s real estate crash.

“I don’t think this is a quick recovery,” he said. “I think it will be worse than 2008 and 2009 by a long margin.”

Investors have to decide just how bad the economic shakeout from COVID-19 will be, Hall said.

“If you believe this is going to be a 1930s-style depression, this is not a good time to buy because you have another 10 to 12 years of misery,” he said. “If you believe that at some point in the next three or four years we are going to come out of this and likely there is going to be significant inflation because of what the government is doing, buying is going to be a significant opportunity.”

That’s what Hall sees ahead.

Other property investors are also watching for buys that surface during the current instability.

“We are definitely keeping an eye out for new deals,” said Chad Cook, founder of Dallas’ Quadrant Investment Properties. “We have capital that can move quickly and close all cash for the right opportunities, but we do believe the window of opportunity in Dallas, specifically, could be relatively short compared to past cycles.”

In the short term, he said, many new commercial property purchases may be on hold.

“Today, and likely for the next quarter, the capital markets are virtually closed outside of deep value opportunities,” Cook said. “There are still opportunities with noninstitutional sellers, and we expect the capital markets to come back relatively quickly.”

Dallas-based real estate investor and developer Champion Partners bought buildings coming out of the Great Recession that it later sold for substantial profits. The company is gearing up for a similar play after the pandemic.

“We do anticipate being very aggressive this year as this disruption is likely to provide some excellent investment opportunities for those that have access to capital and can move quickly,” Champion Partners’ Steve Modory said.

Good deals from bad times

One of the Dallas area’s biggest property buyers before the pandemic was developer Centurion American Development Group.

CEO Mehrdad Moayedi said he has several major purchases scheduled to close soon and is looking for more buys.

“The only time we have actually made real serious money is in the bad times,” Moayedi said. “When times are good, everyone and their brother are trying to buy.

“The property prices got so high the last few years you could hardly make any money.”

Moayedi said he just locked up a land purchase he’d been chasing for four years. “The guy wouldn’t budge on the price, and he finally came down,” he said.

Real estate investors by nature are optimistic about the future, so they aren’t being chased off by the pandemic.

“We are the greatest country in the world — we’ll come back,” Moayedi said.

Authored by Steve Brown, Dallas Morning News

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A new season has started for commercial real estate post-pandemic

A new season has started for commercial real estate post-pandemic

Developers, lenders, appraisers, contractors, asset managers, attorneys, and many other professionals have been slammed daily with a barrage of challenges and requests.

By Greg Winchester  – Head of Industry and Alumni Relations and Adjunct Professor, Auburn University Master of Real Estate Development Program

May 8, 2020

It’s been over a month since the double black swan events of Covid-19 and the great oil war have broadsided the U.S. and world economy. Since then the U.S. commercial real estate industry has gone from a fully priced and “risk on” market to an abrupt halt with major players and professionals assessing the impact on planned and existing projects.

Developers, lenders, appraisers, contractors, asset managers, attorneys, and many other professionals have been slammed daily with a barrage of challenges and requests. The current environment has led to an industry-wide scramble to maintain normal business activities. Some long-time players in the industry have shared that they are experiencing a schizophrenic feeling ranging from fear of losses on existing deals, to a fear of losing new opportunities. Across the landscape, new realities and opportunities are starting to emerge in the aftermath specifically based upon property types and/or locations.

Clearly the hospitality sector has been the most severely impacted and is at the tip of the spear. After going through a 10-year recovery following the last financial crisis, the industry finds itself in unprecedented waters. Many hotels have closed, and most operators are applying for both federal and state governmental assistance. Some properties are focusing on serving the quarantined Covid-19 patients while others are assisting medical personnel and first responders on the front line of the medical battle.

Industry trade groups report occupancies are ranging from 2-30% for many properties that are keeping the doors open with skeleton staffs to avoid shuttering. Against this backdrop, other property professionals are assessing possible alternative uses for troubled hotels, such as senior housing and workforce housing.

According to long time hotel industry banking and consulting executive Tom Day, of TD Hotel Capital in Dallas, the hotel sector is among the hardest hit as measured by jobs lost, and the travel industry will be among the last to come back as the economy recovers. Hotel owners are fighting for survival with their attention focused on extreme cost containment, lender discussions, and governmental assistance.

Recovery will be slow. Leisure, corporate, and group demand will return in that order, but full recovery is dependent upon development of an effective vaccine for Covid-19. Despite these circumstances, hotel industry professionals are known for their optimism and creativity and will do all they can to accelerate recovery and create guest experiences that we are accustomed to enjoying.

On the other side of the spectrum, the already strong and robust industrial sector is expecting a substantial pickup in demand and new opportunities. According to David Welch, chief executive officer of Robinson-Weeks in Atlanta, the challenges with “just in time inventory” and supply chains and the acceleration of the blending of industrial and retail will create greater demands for industrial space.

Welch expects additional major tailwinds to come from online grocery shopping and the “onshoring” of American manufacturing back to the U.S. According to Welch, if companies keep an extra 5% of inventory, it could translate into 800,000 to 1 billion square feet of new demand for warehouse space. While the next few months will be challenging, the industrial sector should emerge with new and stronger tailwinds behind it.

The office sector is just starting to see the impact from the crisis and is benefitting from its traditionally long-term leases. This has created a fluid situation that is still unfolding. Concerns over tenant credit quality, workplace stations for users, workplace shift operations, and co-working tenants are surfacing.

How much future office demand will be impacted by companies allowing more remote locations for workers is a hot topic. In addition, discussions around the needs for lobby redesigns and new levels of workplace cleanliness are just beginning.

Dan Lovell, senior vice president with Graham and Company in Birmingham expects more creative and efficient ideas will emerge in the office sector. In addition, Lovell anticipates that as prices reset the investment opportunities will emerge for office investors.

The creative destruction in the retail sector due to e-commerce has dramatically accelerated due to Covid-19. One industry executive shared that he was in the credit analysis and credit counseling business with his smaller retailers. According to Darryl Bonner, senior advisor with Stirling Properties in Pensacola, Florida, the retail sector was performing strongly the first two months of the year due to consumer spending and confidence, but since then, the industry has felt the detriment the most.

The second half of the year should be healthier for retail due to a pent-up demand of consumers to dine out and visit stores. Certain retailers, such as grocery and home improvement stores, have flourished as consumers are staying home and working remotely. Smaller tenants, however, are challenged and are applying for government assistance. They are adapting quickly or closing. According to Bonner, if people can’t come to you to shop, they need to be able to access retailers from their homes.

The multi-family sector is seeing some initial turbulence with rent collections due to the uptick in unemployment, although it varies widely depending upon property level and location. The government-sponsored enterprises Fannie Mae and Freddie Mac quickly developed and published programs on lender forbearance terms for borrowers who did not evict existing tenants impacted by the virus.

According to Joseph Welden, president of StoneRiver Company in Birmingham, tenant collections are off modestly from prior months averages on Sunbelt garden apartment complexes, but they expect annual revenue to be relatively in line with prior projections.

Both leasing agents and tenants are adjusting to no physical showings and to virtual leasing, online tours, and facetime communications. Welden expects a continued increase in demand for SunBelt apartments from investors and tenants due to the continued single-family housing shortage and greater hesitancy by renters to become homeowners due to uncertainty in the market.

The senior housing sector, which has experienced strong tailwinds over the last decade, is seeing mixed implications to their properties and new developments. According to Justin Osborne, vice president at Flournoy Development in Columbus, Georgia, the silver lining for operators is a softening labor market that should reduce operation costs. On the contrary, increases in operations to combat infections spread may become a permanent fixture.

Developers of senior housing projects will wait to see how land prices and construction prices adjust to the new reality and strong, well capitalized developers should benefit. There may also be adaptive reuse opportunities from other property types to senior housing as distressed properties hit the market.

It’s clear from initial discussions that pivoting by developers and operators is occurring quickly. In addition, innovation and creativity are accelerating at a rapid pace. The long-term impacts are just beginning to unfold in this new season for commercial real estate.

Learn more about Auburn University’s Master of Real Estate Development program.

Auburn University’s Master of Real Estate Development program is a collaboration between the College of Architecture, Design, and Construction and the Harbert College of Business. It provides experienced professionals the theoretical and practical knowledge to develop real estate projects emphasizing best practices in economic resilience and design excellence. Visit mredauburn.com.

Greg Winchester is head of industry and alumni relations and adjunct professor for the Auburn University Master of Real Estate Development Program. He has over a 35-year career in banking, finance, and real estate. He is the founder and CEO of Summit Investors, LLC and previously was a co-owner and co-CEO of Trimont Real Estate Advisors.

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Coronavirus Will Accelerate Trends in Commercial Real Estate, Says NAIOP

Coronavirus Will Accelerate Trends in Commercial Real Estate, Says NAIOP

Coronavirus Will Accelerate Trends in Commercial Real Estate, Says NAIOP

NAIOP, the Commercial Real Estate Development Association, is predicting that the coronavirus outbreak will accelerate trends that had been forming in commercial real estate and cause dramatic changes in the industry faster than had been anticipated. The crisis will result in some short-term contractions in the industry, but will lead to a long-term expansion for commercial real estate generally, particularly in the industrial and warehouse sector.

During a special webinar last week Dr. Timothy Savage of New York University, and a research economist for NAIOP, updated his outlook on demand for industrial, office and retail commercial real estate in light the coronavirus.

“Commercial Real Estate was faced with technological disruption before this crisis,” Savage said. “This crisis is more of a natural disaster than a financial crisis; the significance of which is that on the other side of it, the fundamentals will be the same, they have just been moved further along the continuum.”  

These trends, Savage said, affect all commercial property sectors:

  • Industrial:  Prior to the crisis, the NAIOP Research Foundation had revised its projections for industrial demand upward in a report entitled, The NAIOP Industrial Space Demand Forecast. It had forecast decreased demand into mid-2021 due to a lagging supply of available space and economic uncertainty but a fairly quick rebound to robust levels similar to those seen in early 2019. Those levels may now be reached sooner, as people have come to rely on delivery-based goods for more everyday living items.
  • The office sector will be driven more quickly by changing work patterns that will favor decentralized work, co-working and short term leases, even in Class A spaces.   
  • Retail: The converse of the industrial real estate expansion will be a continued decrease in brick and mortar retail, specifically small and independently owned business. Some retailers, especially those that were born online, will continue to have marquee locations for branding and customer service purposes, but this area will continue to decline overall.
  • Hospitality will be significantly negatively impacted, but will bounce back quickly.

Commercial News » Dallas Edition | By Michael Gerrity

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