Is retail really resurging?

David Goldsmith

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Phttps://therealdeal.com/2020/03/04/big-retail-leases-continue-to-drop-despite-trader-joes-deal/

"Ten biggest transactions in February totaled 116K sf, down 38 percent from a year ago.

The leasing of large retail spaces in New York City is still slowing, based on the 10 largest leases made public last month. Trader Joe’s secured the top spot, with mainstays such as gyms and restaurants filling out the rest of the list."
 

David Goldsmith

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Apparently the problem with retail is that "tenants themselves have done an incredibly shitty job running their stores" according to Starwood Property Trust CEO Barry Sternlicht.

 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
yeah Im worried about retail and landlords too actually for next 1-2 months with everyone going into social distancing mode. There will be a lot of tentacles to this crisis that reach far and wide that are affected and unsure how fiscal bailouts will help at the moment..in a few weeks, i feel like everything will be dead and silent out there on lockdown as viral tests come back
 

David Goldsmith

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I agree. It was one thing decades ago when rent wasn't such a big percentage of a small retail business total monthly, but now even if your labor, cost of goods sold, etc shrinks to close to zero with rent at what it is being down for 1 or 2 months could kill your whole year. And in small buildings the retail space can provide 60% of the entire Rent Roll so if your store stops paying rent you could easily be under water. We saw this a lot in the early 1990s in Soho, East Village and other neighborhoods: first the store went out and then the building got foreclosed on.
 

David Goldsmith

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For Sam Zell, it’s all about “foreclosures and opportunities”
The Grave Dancer has billions in cash to deploy but will stay away from the sector he calls “a falling knife”

Sam Zell’s Equity Commonwealth real estate investment trust has $3.4 billion in cash ready to deploy in these times of distressed assets, but the self-described Grave Dancer isn’t ready to tango in one sector: Retail.
Zell, who is also chairman of Equity Residential and Equity Lifestyle Properties, said his companies “don’t buy markets, we buy deals.” And with retail real estate, he’ll likely steer clear, he said. In a Zoom interview with SkyBridge Capital founder Anthony Scaramucci, Zell called retail “still very much of a falling knife,” according to Crain’s Chicago.


Zell expects banks to be less forgiving with borrowers, choosing to jettison the “extend and pretend” strategy that many took during the last financial crisis. Banks tended to hold off on foreclosures back then, he said, with the hope those loans would resolve themselves as the economy recovered.

“I think the lending community this time around very much wants to, quote, clean the books,” Zell said, according to Crains. “And I think there are going to be a lot of foreclosures and opportunities.” He added that some investors who might have survived the last few months could falter when banks come knocking.

Zell built up a massive war chest of cash with a huge selloff of properties over the last several years. Equity Commonwealth sold around 150 office properties in recent years, leaving it with just five today.
Zell expects “some significant recovery” from the pandemic-fueled market crisis by year end, and appears optimistic about the economy generally.

“I think just what you have seen in the last few weeks since there’s been some partial openings of various places around the country, people have been willing to spend and in fact, seem to be very excited about the opportunity to get back into the commerce side of the world,” he told Scaramucci.
 
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