What I’m Reading
The Great Divide: A new report by Moody’s shows that the bid-ask spread between buyers and sellers of commercial real estate has continued to widen, with sellers seeking pandemic-induced discounts and buyers holding the line on pricing. This can continue for some time so long as liquidity remains in the debt market (which it has), preventing forced sales of otherwise performing assets. Moody’s
Top Heavy: San Francisco is the US city most at risk from sublease space according to CBRE’s latest Tech30 report. In 2020, previously-booming San Francisco has seen its amount of available office space double from 2019 to 14.6M SF, or a total availability rate of 17.6%, with sublease space making up over 5M SF of the newly available space, according to CBRE. Its average asking office rent has fallen to $80.64 per SF, down 4.1% from Q2. CBRE
Fighting Over Scraps: Bankruptcy filings are surging due to the economic fallout of Covid-19, and many lenders are coming to the realization that their claims are almost completely worthless. Of course, this will get pinned on the pandemic but it has every bit as much to do with lenders dropping protective covenants in order to win deals in a desperate search for yield over the past few years. Bloomberg
Creative Destruction: In the midst of the pandemic recession and economic fallout, new businesses are being created at the fastest pace since 2006, as far back as Census records go. This is in stark contrast to what happened in the last recession. Washington Post
Bumping Along: While debt capital was often unavailable for borrowers seeking refinancing during the global financial crisis, there are still lenders willing to work with borrowers during the COVID-19 pandemic. That being said, lender appetite has still declined and government agencies are the only lenders who have increased origination this year while all others have fallen substantially. Globe Street
Chart of the Day
Since at least the 1960s, every US recession has resulted in an uptick in rental vacancy.
Source: St. Louis Fed
WTF
Sounding the Alarm: A man was arrested after calling 911 to report an alien invasion so he wouldn’t have to go “Independence Day” on them because Florida. Radio.com
Gig Economy: Some people make extra money by driving for Uber or delivering food for DoorDash. An attorney had a side hustle as a serial bank robber according to the FBI because Florida. TampaBay.com
Basis Points – A candid look at the economy, real estate, and other things sometimes related.
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