What I’m Reading
To the Bone: Documents from WeWork’s SPAC fundraising show that the coworking giant lots $3.2 billion in 2020, a slight improvement from 2019. Global occupancy rates during COVID fell to 47 percent at the end of 2020, a decrease from the 72 percent at the beginning of the year. A trimmed down WeWork spent pandemic dominated 2020 shedding underperforming locations around the country, renegotiating leases, and laying off staff to cut its cash burn.
The company claims that it will be profitable this year and is looking to go public via SPAC at a $9 billion valuation. Call me crazy but this could actually work, given that holdings have been pared back to only the best performing locations and the changing nature of work in the post COVID world. I still like the Industrious fee management model over WeWork’s lease arbitrage but co-working is not at all poorly positioned for the post COVID world. Commercial Observer
Flush: Lenders who are desperate to generate yield are pouring capital into financing the white-hot home flipping market. This is not really a concern for now as competition is pushing rates down at a time when profits are near all-time highs. However, it could become problematic when the market eventually slows as these loans are still quite expensive and can erode underwritten profits quickly if homes fail to sell. Bloomberg
Capped: Heading into the seasonally strong spring market, home sales are actually falling thanks to paltry inventory. The Wall Street Journal
Wrong Direction: The Manhattan office market continues to reel from the impacts of COVID-19, with net absorption in the fourth quarter of 2020 clocking in at negative 10.6 million square feet, the highest negative total recorded since early 2009 at the peak of the Great Recession. Total leasing activity over the quarter came in a 4.2 million square feet, down 13.4% from the prior quarter. Globe Street
Don’t Call it a Comeback: Counter to popular narrative, the luxury ($4mm+) housing market in Manhattan is on a tear. A new report indicates a 60% increase in contracts signed on luxury homes in the Big Apple during the first quarter of 2021 as compared to the same pre-pandemic time period in 2020. Olshan Realty, Inc.
Chart of the Day
Chart below shows rent increases broken down by renewal or new lease in the publicly traded single family for rent space. That’s quite a renewal discount. Thanks to Chris Dorociak of JBREC for this one.
Source: John Burns Real Estate Consulting
WTF
Bombs Away: A base jumper fell to his death when from a 14 story hotel when his parachute failed to open because Florida. For those not aware, this is exactly what Charles Darwin had in mind when he first wrote about natural selection. Daily Mail
‘Merica: There have been several reports in recent weeks that tie the high COVID mortality rate in the US to our high rates of obesity. Not one to take this sort of news sitting down (pun intended), donut chain Krispy Kreme has announced that customers who show a vaccination card can receive a free donut every day for the remainder of 2021. The American eater wins again. The American healthcare system, not so much. NBC San Diego
Basis Points – A candid look at the economy, real estate, and other things sometimes related.
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