Back At It!

Back At It                                                                                                                                                 BY: ND

Nothing lasts forever, especially a blogging hiatus during a pandemic.  The fodor from real estate and financial writers in the local and national media was too tempting to resist and so, just when I thought I was out…they pulled me back in again! And from the market’s perspective, there has never been a better time to write.

The Market is Not the Economy, Stupid!

In the past two weeks we’ve seen record unemployment claims precede a stock market rally, only to have oil futures go negative (ending the day at -$37.60 per barrel, the first negative close in history) and again, derail the stock market.  In times of market volatility and turbulence, commercial real estate can be seen as a safe haven for investors, but this is not just market volatility – this is a global pandemic.  

What About the Rent? 

There was widespread panic that tenants across property types (multifamily, office and commercial) would be unable to pay rent and that only turned out to be partially true.  Multifamily, as tracked and reported by NMHC and while real estate data of any kind, especially collections data is market/product sensitive or “hyper-local” as the cool kids say.  Data seems to show Orange County at about 94% + collected for the Month of April, trending slightly above the national averages of 90% to 93%.

Friends in the Office sector in Orange County, California indicate that collections are in the 80% to 90% range, but that Retail collections are in the 40% range.  Yes, 40%! But if you think that’s bad, some Malls and Shopping Centers are tracking at 10% to 20%!

Too Early to Tell

Short-term, property values in multifamily and office will hold, but malls and shopping centers will be impacted.  Long-term, if this quarantine-scenario continues, and burdensome/onerous legislation is enacted to interfere with the terms of lease agreements and contracts between property owners and tenants of residential and commercial space, we could see vacancy rates increase, rental rates decrease and property values decline as a result.

Stay tuned for more information on the topics and trends surrounding investment real estate here in Orange County, California and elsewhere in the US.