News

Landmark Links June 2nd – Spread Out

One Big Thing

One of the big reasons that some companies are embracing work from home for office employees is that there will be a substantial amount of cost associated with re-opening.  The natural response seems to be trying to be cost effective by retrofitting the existing open space areas with cubicles and Plexiglas dividers.  Talk of this fix has been seemingly everywhere and Plexiglas suppliers have been busy in recent weeks.  However, the dividers are not quite the panacea that they’ve been billed as.  From Bisnow (emphasis added):

But how safe can it keep workers? In a recent discussion about the office of the future, a Cushman & Wakefield spokesperson told Wired, “You’re going to see a lot of plexiglass. … Having that divider will make people feel safer.”

But feeling safer and being safer are two different things entirely.

“It’s theater, just like we saw after 9/11,” said Ron Weiner, CEO of office furniture purveyor iMovr in Seattle. He believes plexiglass shields only accomplish the first of those two things, feeling safe, and recommendations around these solutions are just “what real estate and furniture companies are trying to get people to think because their stock is now trading at 40% of what it used to … The acrylic shield is the epitome of theater.”

The reality is that a barrier between cubicles does very little to prevent the spread of a virus that stays in the air for a long period of time in an environment where people are moving around to go to the copier or grab a cup of coffee in the break room.  The stark new reality of offices is that employees will likely need to spread out more and wear more masks, not to mention deal with common areas like restrooms and elevators.  This means a higher cost per employee for office space.  So landlords are left with a choice to either lease more office space for the same amount of people or allow for more flexible remote work and they seem to be choosing the second option.

What I’m Reading

Opportunists: Although many tenants have a legitimate need for rent protection during the pandemic, these same protections are being abused by bad actors that are  financially stable yet aggressively demanding relief from their property owners and—in many instances—unilaterally refusing to pay rent.

Lagging Indicator: If you own a publicly traded REIT, chances are that its down substantially since 2019.  However, private funds are only done a small fraction of that – at least on paper.  From WSJ’s Jason Zweig:

These differences highlight the gap between how public and private markets work. The common fund abbreviation NAV, which stands for “net asset value,” in reality often signifies “near asset value.” That can be the case whenever a fund owns nontraded assets—not just private real estate, but private equity, venture capital and whatever else doesn’t have a daily market value.

Nature is Healing: TPG Real Estate Finance was one of the mortgage REITs that nearly red-lined back in March thanks to margin calls.  It survived and has now been recapitalized by Starwood with a $325MM investment, a good sign for stability in the sector.

Staying Put: The COVID pandemic makes it highly likely that a lot more seniors will decide to age in place rather than move to a senior facility.  That’s bullish for the home healthcare industry but bearish for the senior living industry.

Double Whammy: Retailers who were already hit by the pandemic and getting ready to reopen have been forced to board up their stores thanks to nationwide protests.

Chart of the Day

Source: Deutsche Bank Securities

WTF

Lock Him Up: A Youtube star with an estimated $19 million net worth was caught looting at an Arizona Mall because zoomers.

Gotta Hear Both Sides:  A Hindu priest who was said to be both high and drunk when he decapitated a man with an axe to appease a goddess in a bid to end coronavirus.  I guess we won’t know if this actually worked for another couple of weeks.

When You’ve Gotta Go: A female rioter was caught on video pooping on a flipped police car as the nationwide toilet paper shortage continues, unabated.

 

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