Urbanexus Update - Issue #109
H. Pike Oliver assembles and distributes this arbitrary weekly selection of real estate and community development news. Some links lead to items that are behind a paywall.
The economy
U.S. equity markets added to their re-opening rally during late May with gains of roughly 4% following a robust rally in April, which was the best month for stock indexes since 1987. Driving the gains over the last two months has been early signs of an economic rebound, particularly in the all-important U.S. housing market, as states and countries around the world continue to accelerate economic re-openings while new cases of coronavirus continue to decline. Concerns over domestic politics, social unrest, and U.S.-China relations took the spotlight away from coronavirus while economic data was in-focus; hints of a return of relative "normalcy."
Putting some perspective on the pandemic
Hardly a day goes by that some otherwise sober and well-grounded observer offers a sweeping prediction that the coronavirus will change just about everything. Such radical change is unlikely. After the coronavirus pandemic, we will still fly, shop in stores and go to concerts. It’s other things that will change.
Investment
Top 100 Real Estate Investors 2020
The Investment & Pensions (IPE) Real Assets top 100 ranking of some of the world’s largest real estate investors, has captured more than $1.44 trillion in infrastructure assets held by pension funds, sovereign wealth funds, insurers and other institutional capital owners. To be included, investors need to be owners, not third-party managers of assets. The annual survey confirms that a third of investors are putting new investments on hold, and more than half expect the unfolding crisis to affect their real estate strategies and/or allocations
Alaska Permanent Fund plans $900m real estate move Plans to invest $700m in industrial and multifamily REITs and backs Kayne Anderson debt fund with $200m
Finance
Forbearance? Better think twice — rebusinessonline.com
It’s generally implied that entering into a forbearance agreement will not impact a borrower’s ability to secure financing in the future. In an age that obsessively collects and retrieves data of all sorts, experience — and common sense — suggests that forbearance agreements will not be consigned to the back of a dusty file cabinet. In the case of Fannie Mae, for instance, loans will be automatically considered in default during the forbearance period, and lenders will therefore be assigning them to pre-watch or watch lists. These records will not disappear once the coronavirus does.
Share of mortgage loans in forbearance
The Mortgage Bankers Association’s (MBA) latest Forbearance and Call Volume Survey revealed that the total number of loans now in forbearance increased from 8.16% of the servicer portfolio volume in the prior week to 8.36% as of May 17, 2020. According to MBA’s estimate, 4.2 million homeowners are now in forbearance plans. To put these numbers in perspective, the MBA notes "For the week of March 2, only 0.25% of all loans were in forbearance.".
Mortgage activity buoyed by growth in purchasing
The latest home buying and refinancing data have shown an increase in overall mortgage activity, as indicated by the Mortgage Bankers Association's Weekly update.
Industrial
Warehouse demand poised to rise
CBRE Group says there will be a rise in the demand for warehouse space due to changes to business supply chains as the nation’s economy restarts. For example, companies may well have to create more domestic supply chains in this new environment. An additional 400 to 500 million square feet of warehouse space is needed for a 5% uptick in business inventories, according to CBRE research.
Retail
Tuesday Morning files for Chapter 11
Tuesday Morning is a discount home furnishings chain. The company opened its first store in 1974 and currently operates 687 stores in 39 states. The retailer expects to permanently close approximately 230 stores to focus on high-performing locations. The phased store closures will take place this summer.
After closing all stores and furloughing most of its 9,000 employees on March 25 as a result of COVID-19, Tuesday Morning has reopened more than 80 percent of its existing store footprint and expects to continue store reopenings and bringing associates back to work over the coming weeks. With no e-commerce platform, the closure of all physical stores was particularly devastating for Tuesday Morning compared with some other retailers, according to Business Insider.
Housing
New Home Sales data released on May 26, by the U.S. Census Bureau crushed expectations, rising by 0.6% in April to a 619k annualized rate versus consensus estimates of a sharp plunge to 495k. Housing-related stocks were slammed at the outset of the pandemic on fears that a coronavirus-induced recession could enflame a repeat of the Great Recession, but instead, recent high-frequency housing data has indicated that housing metrics have formed the early contours to a "V-Shaped" recovery pattern, suggesting that the housing industry could actually be an unexpected source of strength to lead the post-coronavirus economic rebound.
Regional and metropolitan dynamics
Most vulnerable housing markets in the USA
The analysis of the American Community Survey (ACS) suggests that renters and young adults under the age of 34 are likely to face higher prolonged unemployment risks as a result of the coronavirus pandemic hitting the labor market. The labor market risks are also uneven across states, with state economies heavily reliant on leisure, entertainment, retail and personal services being most vulnerable.
While recent job losses due to the coronavirus shutdown are astounding and widespread across industries, the expectations of how fast the return to normalcy will take are quite different for the hardest hit sectors. The recent economic indicators suggest that construction might go through a relatively fast V-shaped rebound once the shutdown orders are lifted. The destiny of hard-hit manufacturing is less clear. The International Institute for Management Development (IMD) in Lausanne, Switzerland developed a list of potential winners and losers and identified manufacturing as an “in-between” sector.
California population may be peaking California has seen strong population growth for 170 years, but new data indicate we may be reaching a peak and, with a census pending, could soon decline.
Environment and resilience
Tech giants to develop 'Building Transparency' — www.enr.com Five technology giants and one floor covering maker are showing their commitment to embodied carbon reduction by joining the board of Building Transparency—a nonprofit formed recently to further develop a free-to-use digital tool for estimating embodied carbon in building construction, called the Embodied Carbon in Construction Calculator. Amazon, Facebook, Google, Microsoft and Salesforce, along with veteran climate-activist Interface, are part of the board of BT, which took over EC3 from the decade-old Carbon Leadership Forum at the University of Washington. May 21 marked the first . . .
An office building and the Living Building Challenge
The recently completed Watershed Building in the Fremont district of Seattle is part of a pilot program that incentivizes meeting the requirements of three parts or “petals” of the Living Building Challenge as well as other stringent energy and water conservation measures.
The Living Building Challenge petals are performance areas such as materials, energy and water. Additional petals include beauty, place, health and happiness, and equity. Each petal has complex requirements aimed at minimizing a building’s impact on the environment.
Watershed is designed to meet the materials, beauty and place petals; and has additional requirements from the city of Seattle for reducing total energy usage by at least 25% and total water usage by 75%, as well as reusing 50% of captured stormwater on-site. The building’s performance is measured post-occupancy over a 12-month period and must meet these metrics.
Leadership
Steve Felix interviews Monica O'Neill
Drawing on over 30 years’ experience, Monica advises Tristan Capital on global client relations, fundraising and marketing matters, and is CEO of her own emerging manager consultancy, ENSO Advisors LLC in Washington, DC.