Lockdown Hits UK Commercial Real Estate, Retail Landlords & Their Investors: Most Property Mutual Funds Suddenly “Gated”

Never before have so many property funds shut the doors on so many property investors.

By Nick Corbishley, for WOLF STREET:

Against this backdrop of unprecedented uncertainty, as tenants of shops, bars, restaurants and offices refuse to pay their rents en masse and almost all commercial property deals fall through, it’s all but impossible to put an accurate price on the current value of commercial real estate.

Virtually no one can escape the economic fallout from Covid-19. Not even the owners of commercial real estate, who benefited so handsomely from the central bank-engineered bailouts and property bubbles of the past decade, are immune.

In the UK, a decision by the government to grant retail tenants a three-month moratorium against eviction — an essential lifeline for many businesses that have seen their incomes dry up or drop dramatically as a direct result of the lockdown — has shifted the locus of immediate financial stress from tenants to property owners and their lenders.

The shuttered bars and restaurants in central London are a case in point. Early last week, they received a collective quarterly rent bill of around £500 million. But most of the bars and restaurants took advantage of the government’s moratorium: Instead of paying their rents, they decided to use the freed-up cash to try to weather the crisis. Now, it’s their landlords who are suddenly short of money and who may, as a result, struggle to pay their staff and meet fixed costs such as quarterly interest payments to lenders.

The same is happening across the retail landscape. Some commercial landlords received less than a third of their expected rent on Wednesday.

They include Intu, the embattled owner of dozens of semi-shuttered malls in the UK, as well as a handful in Spain, which revealed it had collected just 29% of expected first-quarter rent, even after offering a deferral and cutting service charges. That compares to 77% during the same period last year, which was already low.

Even before the virus crisis, the company was already on its last legs having endured wave after wave of retail restructurings, resulting in soaring vacancies and plunging property values. In mid-March, two weeks before the UK government initiated a generalized lockdown of the retail sector, Intu warned it was on the brink of bankruptcy after declaring losses of £2 billion for 2019 and a debt of £4.5 billion. Its shares are now worth just four pennies a piece, having tumbled by 96% over the past year.

Intu is now threatening to take legal action against non-paying tenants, saying it would not “bankroll” retailers that have “just decided they don’t want to pay their rent.” Many other retail landlords are reportedly doing the same, despite the fact that many of their tenants have had to halt the lion’s share, if not all, of their business activity, decimating their earnings for the foreseeable future. Even before this crisis hit, many of these retailers were already struggling in the face of slowing sales, high costs, low profitability and rising competition from online rivals.

Intu is also frantically lobbying the government to grant it access to the £330 billion of state-backed loans and guarantees the government has pledged to roll out in support of businesses affected by the lockdown. If the government caves, Intu may have a fighting chance of renegotiating the huge loans it owes to its lenders before the covenants on some of those loans are broken.

Given the company already failed spectacularly in its bid to raise fresh funds from investors earlier this year, the banks may end up deciding not to throw yet more bad money after bad, even if the government agrees to guarantee up to 80% of any new loans. After all, once the lockdown begins to be lifted, the UK’s bricks-and-mortar sector will be in an even more parlous state than it was before the crisis, as evidenced by department store Debenhams’ announcement Friday that it is filing for bankruptcy, less than a year after being rescued by lenders, which wiped out its stockholders.

There’s no way of knowing how many more retail chains and store will follow in Debenhams’ doomed footsteps. Against this backdrop of unprecedented uncertainty, as tenants of shops, bars, restaurants and offices refuse to pay their rents en masse and almost all commercial property deals fall through, it’s all but impossible to put an accurate price on the current value of commercial real estate.

This is the rationale being used to justify gating most of the UK’s large open-end property mutual funds, trapping over £20 billion of investor funds. The first wave of closures, in mid-March, affected around a dozen mutual funds that offer daily withdrawals to their (predominantly retail) investors, even though the funds’ core investment — offices, industrial property and retail parks — is extremely illiquid, often taking months to offload. Between them, these funds manage some £11 billion of assets, equivalent to around a third of the total assets under management in the UK’s property fund sector.

At the end of March, a fresh wave of gatings hit, as the £3.4 billion BlackRock UK Property, the £2.4 billion Schroder UK Real Estate funds and five institutional funds managed by Royal London and Legal & General, including one with assets of £3.4 billion, announced they were suspending redemptions for the foreseeable future. Unlike the earlier round of closures, these funds have quarterly or monthly redemptions and are typically held by institutional investors with a more long-term investment approach.

“The basic issue is the same: there’s fundamental uncertainty over the net asset value,” said independent property consultant John Forbes. “That’s compounded if the rent income doesn’t arrive. That potentially makes the valuation more challenging.”

In times of extreme financial stress and uncertainty, it’s not unusual for real estate to be plagued by acute liquidity issues. In June 2016, in the aftermath of the Brexit vote, six commercial real estate (CRE) funds suspended redemptions. But never before have so many real estate funds shut the doors on so many real estate investors.

Those investors are likely to have to wait quite some time before they see any of their money again. Material uncertainty “is still going to be here on June 30. I’m incredibly doubtful that we’ll be through this on September 30. [The funds] can’t resume trading until then,” said Mr Forbes. If the recent experience of the gated (and eventually wound down) Woodford Equity Income fund is any indication, by that time the investors may suddenly find that the value of their investment has significantly shrunk. By Nick Corbishley, for WOLF STREET.

In Hong Kong, sales at luxury goods stores, once the largest category, collapsed by 86% since their peak in 2013. Read... A Word About Hong Kong’s Retail Sales Collapse: It’s a Mess

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  101 comments for “Lockdown Hits UK Commercial Real Estate, Retail Landlords & Their Investors: Most Property Mutual Funds Suddenly “Gated”

  1. Paulo says:

    Excellent article.

    One man’s debt is another man’s profit and someone elses pension. Some of these instant solutions have no real solution.

    What a nightmare. How does any market supposedly respond to a “too bad so sad for you”? I would be interested to hear some ideas from others.

    • andy says:

      Sorry, no off-boarding this ship.

    • RepubAnon says:

      The dominoes are falling.

      Both residential and commercial tenants can’t afford to pay rent.

      That means landlords can’t pay the lenders.

      Eviction/repossession doesn’t help, as nobody can afford to rent (or open a new business)

      Property values fall, so the lenders can’t meet their obligations.

      Fun times

    • Thomas Roberts says:


      In general, I see pay as you go social security type systems as the only viable sustainable retirement option for the masses.

      Because, alot of people have private pensions or state pensions backed by investments, governments have to protect them, or else they will be voted out of office. This also applies to rich people, who want to be richer.

      Because, people and their employers don’t want to put enough away to actually fund their pensions, they instead put it in investments such as real estate or stocks. But, if an economy isn’t actually growing or growing too slowly to match their expectations, this money has to come from somewhere or be made up. So you are left with the massively inflated real estate and stocks and more bubble.

      So when the bubble starts to pop you are left with an impossible political situation where the leaders do whatever gets them elected the next time, and keep the bubble inflated, but the problem grows until it explodes.

      Many countries could be at the boom point, so what does it mean? Probably most pensions and a large part of the countries savings disappear. This will effect many, but, not all countries.

      Because, a country only has whatever it workers actually produce in a given year, trying to magically make money faster than the actual economy’s growth leads to market distortions that eventually have to crash. The commercial real estate investor’s and the like do whatever they can, to on paper be growing rapidly. But, the rest of the economy is at odds with this.

      The fact that in places like America alot of people “the baby boomers” are going to become pensioners instead of workers, means this bubble cannot last. As they will attempt to cash out their pensions at a growing rate, these bubbles will reveal themselves as ponzi schemes.

      This isn’t a direct answer to your question, but this is how I see the bubble in general. I imagine England is very similar to America in terms of these bubbles. The only thing that can happen is the bubble pops or massive intervention that will screw up the economy even worse, but the bubble will pop eventually.

    • Deanna Johnston Clark says:

      Culminating around 1970 onward the system has rewarded self advancement at any price to others.
      Now it’s being hoist with its own petard….only a return to decent business ethics and concern for the public good can make anybody’s self advancement happen.
      Sorry, J.P. Morgan….”The public be damned” finally damned itself. Wonderful opportunity for those who secretly always wanted a better way…

    • cb says:

      @ Paulo,

      In your first line, it looks like the debtor is supporting the profiteer and pensioner. That can be a heavy load for the debtor. But what choice do many debtors have? In our system, to escape lifelong rental servitude, most have to take on debt (a mortgage) and hope to survive it and pay it off. During the life of the mortgage, renting money has been substituted for renting shelter. The debtor’s hope is to survive the mortgage, pay it off, and attain some security.

      Some of the world has become a financialized rentier society. Life can be need to

  2. R2D2 says:

    Intu is a mess. The company piled into giant offline malls, just as everyone else piled into giant online warehouses. Intu will probably get a UK government bailout. It is too big to fail. Some entire towns rely on the shops under its roof.

    • Mira says:

      Yes .. & but .. how much bailout monies can any government afford ??
      In Australia a tenant can’t be evicted for 6 months if they have lot their job as a result of coronavirus pandemic ..
      Now is the time for landlords to start advertising room to let per whole family ..
      “Hey Ma .. the good ol’ days are back.”

      • *10# says:

        As I see it .. the whole of Australia is in melt down .. courtesy of our very own Mr. Goody2shoes Prime Minister Scott Morrison ..
        bad luck runs in 3’s .. he is the third Liberal PM in a row .. a JINX !!

        • *10# says:

          Today we need inspired leaders .. we have the old run of the mill generic types .. & look where they have taken us !!
          Screening & quarantine was non existent in Australia .. Ebola was advertised globally .. Swine Flu .. Sars & god only know what else ..
          Over 6 months ago .. just out of the blue .. hospitals in Australia were instructed to ask patients if they had had .. or come into contact with Mad Cow Disease .. easily sparking rumours that Australia is infested with this disease thereby causing the potential decimation of our Beef Export Industry ..
          Shear mindlessness ..
          Even today screening & quarantine is hotch potch at best ..
          To my mind .. today .. property investment is worthless .. GLOBALLY ..
          Who did this to us ??

      • Deanna Johnston Clark says:

        It’s also interesting to see just what jobs are truly necessary!! Here the outdoor workers of all sorts haven’t missed a day…grocery stores have increased their hours…hardware stores, repair men and women, on and on.
        My son will meet his mortgage because his coffee/waffle shop has become a neighborhood hotspot for that first cup.

    • char says:

      Do malls work in a 1,5 meter economy? I didn’t thing they worked in December 2019 so let alone now. But Intu are the malls that are the best and should close last.

    • MC01 says:

      Even if Intu is directly bailed out right now, how long can it last? Another year? A couple more years? Then what, and that’s without taking into account the terrifying possibility of another full lockdown down the road due to the inevitable tail of new cases sending politicians hiding under their beds and us at home once again.

      I’ll post the details in a piece I am writing, but experience in China right now seems to hint that even as retail stores are reopening online sales are literally skyrocketing. It will be interesting to see the data on Singles Day this year.
      In short the first data point that this crisis may actually be worse for brick and mortar retailer than originally thought: not only more people are discovering online sales but Alibaba, Amazon and the rest of the crew are taking copious notes on how to expand their delivery services and allow them to cope without the collapse experienced in Italy and Spain.

      How can Intu remain viable in such a climate? Much more critically how long can HM Government keep on sinking money into it before Intu becomes a political liability or people start getting angry? Better amend bankruptcy laws and hire new adminstrators right now.

      • char says:

        Intu has only a few malls, but they are the best and Intu’s only problem is too much debt, not a lack of tenants* If Intu malls don’t survive than no mall can survive.

        *more tenants would be nice but it is during a B&M recession.

  3. DRue2514 says:

    I’ve lived on the outskirts of London for a large part of my childhood and adult life. Kingston has always been a big shopping centre; the first 6 Saxon kings were crowned here in the 10th century. Before this crisis I’ve been seeing increasing numbers of empty shops. Last week had an apocalyptic feel when I walked through, outnumbered by the homeless and mentally ill. I did see a lady kindly offer food to someone. The problem is retail cannot support the high rents and business rates. Housing is in demand in this area but the reality is these commercial property portfolios will be massively written down. That is the elephant in the room here.

    • Clifford says:

      Besides the Covid disaster, like many parts of the UK, the town centers were bombed not by the Luftwaffe, but by the British Town Planners.
      Hideous new commercial buildings are cold, lack human scale and alienate the street, which becomes a raceway for traffic. I.e. Eden Street, Kingston. This is the price paid for destroying architectural heritage. The first towns to come back will be those that are organic, natural and human scale.

      • Xabier says:

        I wouldn’t hold out any hope.

        You might look up the new town built by Cambridge University, ‘Eddington’ – dreadful, with a senseless and unviable ‘market square’.

      • char says:

        You mean towns that can use their historic center as tourist attraction. Guess what, you only need time for that. Calais will be swapped by tourists in 50 year

    • stan6565 says:

      Just as the brick and mortar business model is dying off, our town planners purse their dreams of Croydonisation, are adding tons of retail capacity coupled with tons of new “condos” for new “consumers”, eg Eden Square redevelopment, cluster of 16-storey buildings at old post office at Wheatfield Way.
      And to confirm democratic compliance, our councillors organize public consultation, which are by chance held in the last week of August or the week between Christmas and New Year.
      I had that Jon Tolley knock on my door last December. He was not pleased when I gave him my piece of mind. But will that stop the overdevelopment rape our of town?. Yeah sure.

  4. Seneca's cliff says:

    Wipe out the shareholders, then split up the equity in the property among the bond holders. We have to look at fundamentals first. When this is all over we will need business’s and the properties will still exist but the rentier class is expendable. We will only get through this by paying attention to what is really important and not trying to keep a rickety financial house of cards intact.

    • cb says:

      You will still have the rentier class. In this case they will be the bondholders, or the new buyers.

  5. Tony says:

    It makes sense though. How can you pay your bills without income? e.g. Tenant not working. Landlord doesn’t get rental income therefore putting the whole mortgage at risk. It’s obviously trickling down. I was also thinking of the insurance automotive industry. Why are we paying auto insurance when we’re on lockdown? My wife and I each have a car. There’s no use for two cars anymore. We have significantly adjusted….canceled useless streaming services and are also cutting back on all our insurance bills.

    • Jdog says:

      This is how deflation begins. People who are asset rich, and cash poor begin to liquidate assets to raise cash. This increases supply of assets, and puts pressure on sellers to lower prices to sell. You will see this happen with all assets from used cars, to real estate, equities, and even gold and precious metals.
      Look especially for assets which require money to maintain to drop quickly in value as the selling begins. Speculation assets quickly become financial drains when it takes money to maintain them.
      The need for cash going forward will be huge, and people will be desperate to raise it….

      • otishertz says:

        Absolutely correct.

        And so the great and necessary induced deflation begins.

      • HD says:

        I would make an exception for physical gold and precious metals. Physical gold is a financial crisis instrument par excellence. Generally speaking, when times are good, gold has a tendency to go nowhere or down at best. People see that and conclude: the metal is truly finished, in this modern, sophisticated financial world gold has at last become nothing but a shiny yellow metal with some odd chemical characteristics. It isn’t until SHTF that physical gold is again recognised for what it is: not an investment tool to make a quick buck, but simply money, nothing more but nothing else either, and it has been so for thousands of year in spite of what all modern financial gurus have been preaching these past few decades. Plus, there are no liabilities, unless of course you’ve invested in paper gold (not so sure that you will be able to fully cash in those chips). Never go overboard with purchasing it, but the thing to remember is that it can act as your last financial line of defence when all else gets a bad smell. I think we might be entering such a period now. And real estate is not too bad provided it is paid off and you only have servicing bills to pay.

        • Frederick says:

          Just the fact that central bankers Poo poo gold tells me it’s the thing to hold They don’t want gold and silver taking off as it interferes with their fiat money Ponzi scheme Can’t have that right? Gold is headed ALOT higher soon

        • HowNow says:

          It’s hard to keep bias out of valuing gold as a defense against both inflation or deflation. Currently, gold is highly correlated to the value of the dollar. Historically it has been the opposite. Historically, gold has NOT outperformed during inflationary periods – it will rise in value but lose in the race against dollar devaluation. The opposite has been true, in the distant past, that gold shines during deflationary periods as it loses less value against the loss of value in the dollar.
          But there are two forces against winning with gold: 1) you’re competing not with retail gold investors but against the central banks who move the market – if you can anticipate their moves, you’re sitting pretty, and, 2) you have to buy gold when there is no fear of economic calamity – if you buy now, you’re probably buying with the herd and are likely arriving too late to the party.

        • HowNow says:

          Need to correct this; “The opposite has been true, in the distant past, that gold shines during deflationary periods as it loses less value against the loss of value in the dollar.” Gold RISES faster than the dollar during deflation.

        • Frederick says:

          HowNow I’ve been buying since 2016 but I respectfully disagree about the “ late to the party” part We are in uncharted territory ie interest rates, debt and an ever expanding FED balance sheet

        • Tinky says:


          Not sure what you mean by “Currently, gold is highly correlated to the value of the dollar.”

          It is widely viewed through a USD lens (i.e. “spot price”, etc.), but closely correlated? The trade-weighted USD index soared around 2015, and gold was flat-ish. The Dollar jumped up sharply during this crisis, and gold went up as well. Etc.

          More importantly, given that is at or near all-time highs in many currencies, including the JPY, GBP and EURO, on what basis do you consider any correlation to the USD to be of such importance? In those other currencies, gold has served its long-standing function perfectly, and the USD is clearly on borrowed time.

          With regard to central banks moving the market, it should be obvious that during times of crisis that ability wanes (at best). And given that Gold is a well proven hedge against CB malfeasance and fiat currency degradation, what better time than now to own some?

        • HD says:

          Wolf, apparently I’m not familiar with all the ground rules here. I cannot reply to someone else’s reply on my original comment. Is this to avoid endeless exchanges between two individuals or did I miss something? I cannot find anything in this regard in your commenting guidelines, that’s why I’m asking here. Thx in advance for enlightening me.

          And might I add: the way commenters ineract with each other on your site is refreshlingly courteous in general. Congrats to them. And you for keeping a tight ship.

        • Wolf Richter says:


          The commenting system allows threaded comments up to four levels deep — the level your comment and my comment are at. The majority of readers on this site read it on mobile devices and the fourth level is already a just a very narrow column. A fifth level would be nearly unreadable. That’s why I set the limit at 4 levels. So no one can reply directly to a fourth-level comment (no reply button).

          However…. You can reply with the nearest reply button above it. So it’s always a good idea to put the name you reply to at the top of your comment and then reply at the level where you can reply in the same thread.

        • VintageVNvet says:

          Wolf DOES run a tight ship, and I appreciate it even though he did delete some of my first posts, before I read the rules for commenting here. (somewhat digitally challenged my self,,,,)
          IMO, we need someone fairly knowledgeable about the USA constitution and, like Wolf, adept at and willing to moderate a website so We the People (sitting on our backsides these days, or not) can do the work to conceive and vet thoroughly what, for now, I am calling, “The 21st Century Bill of Rights.” perhaps preceded by something like, “The Declaration of Interdependence.”
          ”Never let a good crisis go to waste,” eh

        • I think you have it backwards, but never mind

      • If they can’t liquidate this holding, what can they liquidate?

  6. gorbachev says:

    Have a bit of cash,some stocks,a few rentals and a small pension,

    Cash earns nothing.stocks down 40%.collecting half rents,

    thank goodness for the pension.Feeling thankful for our

    good health however.

    • Jdog says:

      Your cash is becoming more valuable every day. Give it a few months and you will not believe the deals available as deflation gets going….

      • Frederick says:

        My cash has lost 25% since 2016 so I don’t see how it’s becoming more valuable versus real money

        • VintageVNvet says:

          Not true at any level in FL or CA, except perhaps in relation to very specific and localized dirt, aka real properties.
          Other than those, about 3-5% per year, as has been the case fairly consistently since Nixon stopped redemption of our money for the silver that was supposed to be available upon request at every bank.
          That he also allowed gold to float again was clearly a mixed blessing for some of us, though not the prospectors who wandered through our camp in the Siskiyous in the mid 70s, who loved Nixon for releasing the bounds on gold that FDR had instituted to finance WW2.
          Here’s the BLS inflation calculator, a site which has been part of my biz for many years, trying to figure ”forward escalation costs” of multi year construction projects. (not sure if it comes through with my $10 per hour in 1958 as starting point??,, please LMK, thanks)


    • Rusty Trawler says:

      Hey Gorbachev did you ever do anything with that spot on your head?

      Just trying to lighten up the mood, no offence meant.

  7. Jdog says:

    When government tries to help, it often just makes things worse. In this case, they are taking a short term view, of a long term problem.
    The simple truth is, they cannot bail out everyone, and by moving the problem up the ladder, they are creating much bigger problems..
    If left alone, the businesses and landlords would have probably come to some kind of compromise, as they are co-dependent.
    By doing this the business owners will feel entitled to free rent. The property owners will get behind on their mortgages during a time when property values will plummet. Soon pension funds who by Mortgage Backed Securities will get hammered as well as banks. Like I said, the governments can not bail out everyone, but their mismanagement of this situation will ensure everyone is in need of a bail out….

    • char says:

      Retail was in a very bad position in the UK even before Covid and with no customers a whole lot of retailers would have send in the key. Another problem is a) having a face to face conversation is difficult during Covid, with people on edge which does not help negotiations. and b) every retailer wants to have a negotiation NOW but the Landlord is understaffed. Better to push it forward 3 months and hope for a miracle that keeps most retailers in business. Landlords are also in a better position with there mortgage providers because it was forced upon them for something they wanted to do anyway.

  8. nick kelly says:

    I usually describe myself as right wing (economically) but in these circumstances, rather than bail out Intu maybe just nationalize it.
    It wouldn’t even have to be expropriated: just buy the shares at the few pence where they are. Then to continue this leftist train of thought, make the rents flexible with a certain portion available to small enterprise.

    The ‘high street’ as the Brits call it, was already emptying due to high rents, all based on inflated underlying ‘value’ of the RE. So rather than wait out the painful readjustment to reality, which might take 6-12 months, just let the gov do it now.

    One caveat, at least one. You can’t have a bunch of woolly bureaucrats operating it. Ownership public, management private on contract and salary ( not stock options), reporting to gov.

    • Les Francis says:

      I work building facility management for a very large property trust which manages retail shopping malls.
      The centre I’m based at has over 300 retail outlets with mixed clothing and apparel, food outlets,cafes and retail service shops.
      The majority of clothing and apparel are tenants which are large retail chain brands. Some run 5 – 10 outlets with different brand names.
      There are food courts with your typical junk food shops.

      Within i kilometer there are 5 – 6 other malls all with the same retail outlets and chain retailer tenants.

      Most of them sell non essential stock usually imported.
      Most of the retail tenants have closed down due to lack of trade.

      Of course the real problem is that consumers were oversupplied with choices. Many different retailers selling the same overpriced crap.

      Post virus I am suspicious that many chain retailers will not open up again or reduce the amount of stores in each mall. Many are of course going online.

      Many malls will become nonviable. There needs to be some sort of rationalizing – there’s just too many stores.

      Governments shouldn’t get involved while that rationalization is going on.
      I see an eventual return to low rent High street shopping in the future.

  9. Fred says:

    Its not just overseas that Real Estate funds are being locked down. Try getting money out of crowd funded, Fundrise, based in Washington, DC.. Theres a bunch of in over their heads lying fund managers at Fundrise.
    When liquidity goes its only a matter of time before the fund is insolvent.

    • S says:

      There is something called a first mover advantage. The people who saw the liquidity crisis before everyone else get their money out first. Everyone else is a bag holder who gets out when the assets are repriced lower.

      During the repo crisis, I exited higher yielding money market funds at Fidelity that had loads of repo agreements as a percentage of assets. I instead parked cash in a 100% Treasury Only Money Market Fund with no exposure to repo agreements. That fund is now closed to new investors due to the massive inflow of funds into it and it is now approaching a 0% yield.

      Savvy investors know not to trust the corporate debt that makes up money market funds at brokerage firms as it is not insured like at the banks. Jeffrey Gundlach mentioned this during the 2008 crisis and people tilted there heads sideways as it was such a different way to think about risk.

      • A says:

        Soon to be a NEG Rate at the Fidelity Fund,

        Then what you going to do? Enjoy losing money?

        The reason that Fidelity closed the fund was to slow-down repurchase as the new is all negative, but your still on ship that’s going down.

      • Iamafan says:

        That’s why a Rainy Day Fund is called that for a reason.

  10. Endeavor says:

    Nick Kelly, by the end of you’re first paragraph you have you have become a Nationalist. Welcome to the club!

  11. Wisdom Seeker says:

    Kinda brings new meaning to the term “gated community”!

    Here in the US, many companies get classified as real-estate investment trusts (REITs). Some of them are obvious zeroes already. Others (cell phone towers, data centers) should be okay. In between there will be a lot of near-death experiences depending on the relative timing of receivables and debt payments, mixed in with the uncertain timing of economic revival.

  12. MarkinSF says:

    Except new world order doesn’t really mean the entire world?There’s just too much conflict over resources and tribal competition. But yeah, this latest bail out plan has been in the works for awhile.

  13. David Hall says:

    American REIT’s sold off along with other asset classes recently.

    Not sure how many will die, or how many foreclosures will happen.

    I remember c. 1989 there had been excessive speculation in commercial real estate. Small savings and loan banks were bankrupted. The Resolution Trust Corporation was formed to take over bank foreclosed properties and auction them off in an orderly fashion. There were new office buildings 100% vacant in the outer DC suburbs of Northern Virginia. The situation is different now.

    • Sarangetti says:

      In all pandemics folks need a place to live, small home, flat, apt

      Nobody really needs a ‘mall’, in the short term, they’ll become places to pile up the corpses out of sight, because of the air-cond;

      The future of the mall? Most likely to become like what is seen in Detroit, or Baltimore, just hollow shells of a distant past.

      Perhaps SF rather than fill you empty ‘luxury hotels’ with homeless, that you fill your empty malls with homeless.

  14. Leser says:

    Nick, I think you’re being very measured in your reporting of the situation.
    Even before the forced closures and house arrests had fully come into effect, I heard about businesses stopping electricity bill payments, some into the millions of pounds. Power suppliers are heavily regulated and can’t just turn someone’s lights off, so these decisions were considered and deliberate I thought. The UK economy had been in decline already and the covid madness is igniting it into an avalanche to collapse.

    In London’s breathless 24/7 economy, on which the rest of the country largely depends, every pound sterling received by someone is already urgently expected by the next subject in the economic circle. Breaking this circle in so many places simultaneously is nothing short of controlled demolition.

    That at time when it’s become clear that covid is less dangerous than the common flu (less contagious, lower death rate, even sparing young children unlike the flu).

    • Tinky says:

      COVID-19 is “less contagious” than the common flu?

      You REALLY need to find better sources of information.

      It is, by current estimates, roughly twice as contagious. There are vaccines for the common flue, so a high percentage of the population is immune. No one who hasn’t been infected yet is immune to COVID-19.

      The fact that there is an incubation period of up to two weeks, so that asymptomatic carriers can pass it along unknowingly, also makes it far more dangerous.

      • nick kelly says:

        I’ve read at least 10 times as contagious. The Princess cruise boat docked in Yokohama had 500+ cases. How much of this is due to the long asymptomatic but infectious period, who knows. BTW: they found the virus on ship 17 days after the last passenger got off.

        My guess about all the weird comments is that they are following their lodestar, the commander-in- chief. They need to check in with him more frequently, like every hour, because he has moved on from ‘it’s just like the flu’.

        • Paulo says:


          Yes, some are following their commander. However, I also have a different conclusion about the varying opinions on this pandemic and it is this.

          People believe what they need to believe.

          Last article I tried to just post data about BC. Sometimes I post anecdotes, a story of what I see. But I have friends who mine their contacts and glom onto only what they need to think is true. One friend in particular seemed to share the idea (over and over) that the lockdowns are an overreaction and that the economies should just get back to work. It almost smacked of desperation and that is when it hit me. He had constructed his life story about how he would retire, when he would retire, and how his finances would look to make it all happen. In two weeks it all blew apart. If there is another explanation out there, then he wasn’t wrong, only screwed around by________ (and the fill in blank can change). When he finds the explanation he is comfortable with, he forwards the link and expects agreement.

          When I would respond to his emails with facts, he couldn’t take it because I wasn’t reinforcing his narrative. It made him angry. As a result I have quit responding and he has finally quit his emails.

          This all reminded me of a cartoon I saw the other day. It went something like this. An older guy had a bewildered expression on his face, and looking up from his computer he said to his wife, “My Facebook friends are amazing. Just two weeks ago they were constitutional experts. Now, they are epidemiologists”.

        • HowNow says:

          It’ll be hard to find someone in the medical profession to say that the “lockdowns are an overreaction”; more likely among restaurant owners.

      • Leser says:

        @Tinky – you’re right and I got confused. Covid-19 has a reproduction number R0 of 2.0 according to SCIENCE magazine (article titled “Quantifying SARS-CoV-2 transmission ..”, published 31 Mar 2020). Seasonal flu’s R0 fluctuates wildly and can be above 2.0 but averages 1.4. So it’s more infectious than the average flu.

        I was thinking of the number we probably care about more – mortality. A March 18 new epidemiological study (medrxiv. org/ content/10.1101/2020.02.12.20022434v2) concludes that the fatality of Covid19 even in the Chinese city of Wuhan was only 0.04% to 0.12% and thus rather lower than that of seasonal flu, which has a mortality rate of about 0.1%.

        Given the draconian lock-downs (a third of the planet’s population is locked down, more than were alive during WW2), it’s fair to assume that it will spread a lot less than even the worst flu, and in any case the risk of dying (or by extension suffering severely) from it is lower.

        The US had 6 million new jobless claims in the first weeks of March, more than during the first 6 months of the Great Depression. And that’s just the beginning. A price worth paying?

        • Wolf Richter says:


          The officially number for Covid-19 deaths in Wuhan are bogus. There are now estimates emerging from urn counts that the likely death toll was around 26,000 not the officially claimed 2,535. No one can rely on China’s official figures. They’re pure fabrication.

        • Leser says:

          Wolf, the urn story is nonsense.
          As for the number of urns delivered to funeral homes in Hubei after the quarantine was lifted one has also to consider the number of regular death. Hubei province has some sixty million inhabitants. The regular mortality rate in China is 726 per 100.000 inhabitants per year. The regular expected number of death from January 1 to March 31 in Hubei province without the epidemic was 108.900. In Wuhan, which has 14 million inhabitants, the expected number was 25.410. Photos that show the delivery of a few thousands of urns to large funeral homes in Wuhan are thereby not a sign for a higher Covid-19 death rate. To claim such is propaganda nonsense. Quoting from MoA, 1 April

        • Wolf Richter says:

          Good lordy. Now into spreading Chinese government propaganda?

    • jsm976 says:

      Wow! Keep spreading that stupid Leser. No idea where you are sourcing your “facts”. That last paragraph is an amazing example of how we got here thinking. We easily could’ve followed South Korea’s model, but instead we are here. And people in the US and Europe are dying through triage and shortage of doctors/supplies. Those are facts. Not propaganda.

      • S says:

        I could’ve sworn that the U.S. was told in January by Dr. Fauci that the U.S. would not be greatly impacted by Covid-19. And around the same time Trump was calling the virus a hoax at one of his rallies.

        Government, mainstream media and TV are not your friend. When people in the U.S. started stocking up on food at an accelerated rate in March, my friendly TV news guy told me not to worry.. …cause I would still be able to go to the grocery store and buy food in the middle of a pandemic where everyone standing around me is infected. Oh, and let us not forget about the early-on stern warning that masks do not work so don’t buy them. LOL

        You know what? “Nobody knows nothing” is the rule to follow.

      • Leser says:

        @jsm976, I got the infectiousness wrong, see my above comment. The mortality rate – which we probably care more about – is lower than the flu’s.

        I do agree this flu will wreak havoc in the US on the part of the population at risk: the very old, the obese, the chronically diseased and severely unhealthy, those without access to modern healthcare. Sadly those make up a large number.

        Panic and disruption to the medical system will be a major contributor to deaths. The Great Depression to follow this insane controlled demolition of the economy will cause a spectacular burden on the health system.

    • Wisoot says:

      300 Italian corrupt senior politicians and police (and vatican?) are arrested in a mafia seige Dec 2019 followed by Lombardy viral outbreak. Coincidence or controlled demolition? Despite lock down the price and supply of cocaine in April remains unchanged. Pondering.

  15. Implicit says:

    Interesting tug between deflated assets and printing fiat inflation.
    Deflation first, then inflation?

    • DeerInHeadlights says:

      That’s the million dollar question, I mean 800k question ..err 1.43 million…

    • JM says:

      Certainly a long deflation for the readjustment of the debts, after the central banks finally will be happy to have inflation.

    • MD says:

      Inflation in certain things that are bought by the people who have received the trillions – stock prices, classic cars, art, antiques, high end real estate etc. – all the things that wealthy speculators like to speculate in, basically. A continuation of the effects of the ‘crisis crony capitalism’ we’ve seen in the last decade.

      Can’t really be inflation in anything else – everyday goods – because the money hasn’t gone to enough people to cause that.


      • VintageVNvet says:

        Inflation is in everything in USA, if only because of continuing degradation of USD by FED. FED, a privately owned NGO type of organization answers only to the oligarchy who owns it.
        Rich/oligarchs, by definition, have most of their assets in non-dollar denominated holdings that go up in price/cost when USD goes down; though, IMO, most rich don’t seem to realize that the ”value” of said holdings does not change: e.g. any house has the same value as a home without regard to price/cost delta.
        Perhaps that failure of realization is the ”disconnect” that allows oligarchs to rationalize their manipulations, etc., hurting so many folks, and, of course ignoring the inevitable Karma, or whatever one wants to call it arising from such failures of realization, as it is for all of us.
        (And BTW, in spite of some suggesting that somehow I am a ”progressive” whatever that means these days, I still consider my self an independent always voter, even though I have and will register to vote in a closed primary when I hope it will do some good.)

  16. Mr Wake Up says:

    Our niche is industrial real estate in nyc. Here’s a glimpse into that market.

    We buy sell lease rent and manage commercial real estate. 90% industrial – it has been the strongest asset to own here. Average Industrial price per sqft @ $400 on a purchase $300 for vacant industrial land.

    We lease land @ $12sf and I’m not talking about 5000sf no large tract of land @ 5-100,000 no discounts. On buildings we peaked at $24 and leasing rates started falling last 6 months alone $18-$20.

    In addition real estate taxes doubled in the last 5 years the insurance premiums doubled in the last 5 years. On average industrial real estate taxes are $5sqft and on retail $10sqft. (U see how the fats falling off the bone)

    Now on a sale/ purchase, for over a year market started getting soft. Demand stayed strong but not for leasing. Plenty of money in the streets and the owner users have to compete with institutional money. We have Canadian pension funds outbidding users for assets they purchased with no tenant still sitting vacant vacant for over a year. We have the Blackstones buying and the list keeps growing.

    The socialists chased out Amazons high paying tech center, this was main stream news but what’s not main street news is the 500,000sf amazon fulfillment centers, the 700,000sf built 2 suit amazon warehouse being built, 2 miles from away from another recent center.

    June 2019 was a major blow to residential multi family landlords private ownership protection was wiped away but I’m here talking about commercial.

    Commie mayor big bird has been campaigning for a vacancy tax on retail stores. His claim is landlords are greedy and prefer not to reduce the lease rates. But no mention of Amazon being the reason these store fronts are vacant, no mention business are fleeing this city and the cost on average to open and stay open requires you to be in the financial one percentile group.

    Tenants depend on Landlords for space and Landlords depend on Tenants. We have Tenants who have surrendered their leases, stopped paying rent, closed their doors laid off staff. Or just disappeared to their quarantined homes. Then the random tenant who is essential business and doesn’t get majority of the sales from shuttered restaurants is sending in the checks (for now). Even restaurants. NYC is a foot traffic city even if your door is open the traffic is not there and because of this many closed. Think retail food in the finacial district. These stores pay $60,000 per month in rent the volume is no longer there. NYC is a volume city with razor thin margins. Even the music comes back on the party wont start until it’s too late.

    let me note a key item. There is a morortoreum on evictions which makes sense somewhat but, if a tenant is opened for business and chooses not pay you can cant got to landlord tenant court you cant do anything about it. So when the smokes clears the vacancy rate will jump, the supply will overwhelm the market and asking prices will begin to collapse because all demand has stopped, all requirements have been shelved. Many of these business lost all optimism. Many were already struggling to survive.

    Barely scratched the surface just hit industrial little retail, but banks and laws, and oh boy it goes on and on but not going to make an article in the comment section off an article that’s what we have Wolf for…

    • nick kelly says:

      Good bit. Ya it’s easy to get attention hating landlords. Both the Bolsheviks in Russia and Mao in China had them as enemies to be eliminated.
      In both countries the revolutions produced famine, in Russia’s case the first true Asiatic- type famine.

      Not that your piece was political but it’s good to hear straight from the front line.

      • char says:

        What is an Asiatic type famine and in what do they differ from an Anglo type famine?

    • Paulo says:

      Interesting comment Mr Wake Up. Interesting to see other points of view.

      On one hand there are apt rent controls, and at the other end there are the renovictions. Somewhere in between are the politicians and bylaws/regulations.
      When I read your description of commercial I could only come up with one conclusion. I would bail and move on if it was that bad for me. I’m not being flippant and apologise if it sounds that way. It sounds pretty tough, actually. Like pushing a rope uphill.


      • Mr Wake Up says:

        I hear you thanks for the concerns – what makes it more hysteria on my end is many people very successful people do not concer with my observations. They feel this will be over and business will be back to normal people who all buried their PTSD scars from housing crash 1 and replaced them like plastic surgery with artificial bubbles.

        Now all the vampires are waking up looking to feast on pints of blood. But like Mario dracula said over a week ago “we must destroy the futures of our grandchildren in order to save our selves today”

        One last point. Macerich with the jewel queens center mall, the highest gross volume per sqft sales mall in the USA is closed for business even their essential business tenants forced to close.

        Simon Malls, outlet centers plus dont forget they acquired Forever 21, and then tanger outlets with a long list of vacancies and all closed for business.

        Major market shock coming to a city near you!

      • Pollo Con Chorizo says:

        That’s what I did 10+ years ago, sold all and bailed and ran away.

        No regrets.

        Lot’s of people will stay in the quick-sand, even after they realize the situation, rather than call for help, or find a rope/branch to grab, they’ll swim in place hoping to touch bottom soon. Death follows suffocation.

        Darwinian Capitalism is more than just ownership, or treating your renter like peons. Even plantation owners who saw the North descending left with their carpets long before the carpet baggers arrived, but many stayed hoping the North wouldn’t see their plantation.

        All survivors in human history, got out early.

        Marc Faber wrote an entire book on this subject called “Tomorrow’s Gold”, about how society’s ( civilizations great citys ) are born, and why they die. That in all human history, nothing is permanent.

        Well religion is permanent to date & gold. But no place on earth have titled property owners, held their wealth in all history. Paper fiat currency has the life span of the bat.

    • Big Bird says:

      You big bird sounds like Mr Mouch in Ayn Rands “Atlas Shrugged”

      “What they don’t steal, they tax”

      Drive all private property into the hands of a few corporations.

      Probably good that they drove Amazon(NSA) out, certainly under the cover Amazon is still the owner of every corp-titled property in the area. What else is Bezos going to do with his money? If we wants to preserve his status as richest guy on the Planet he can’t do it buying hold AMZN stock, he’s got to turn it into real assets.

      I’m sure some Unicorn’s from Calif will come to NYC, these birds can afford to have retail space at a loss, heck lets get the guy from “WeWork” I’m sure he can fill the entire city. We just need to force Buffet to fund the operation, he’s got the cash, greedy ol guy.

    • HowNow says:

      First, thank you, Mr. Wake Up, for the insight into your first-hand view of the damage being visited on the real estate market, in general, and the commercial space in particular.
      But you’re lopsided in the criticism of the “commie” politicians. The “rentier” class is hardly a victim. They have government benefits like no other sectors of the economy: they get infrastructure that surrounds and supports their investments, police and national defense protection, a legal system to uphold their rights, and taxation rates that are flat-out pornographic: tax depreciation on assets that keep rising in value (accelerated depreciation, to boot), 1031 exchanges to defer gains, capital gains tax treatment, the new tax law that changes many formerly “capital expenditures” into annual expenses (think: “HOTELS”) and more.
      We’re almost all rentiers in one way or another. The govt. is the first rentier since all land ownership is from the good graces of them as is your “ownership”. Trucks, heavy equipment, capital invested in factory production, all, to one degree or another, are “rented”. So, to single out the “middlemen” who are now the demonized “rentier class” is bogus. Aside from the lowest rung on the economic ladder, we’re all middlemen to some extent. Japan has multiple layers of middlemen – 7 layers in some industries..
      It’s high time to stop blaming others.
      When valuations rise, it’s rare to hear property owners complaining.

    • cb says:

      @ Mr Wake Up –
      “These stores pay $60,000 per month in rent the volume is no longer there. NYC is a volume city with razor thin margins.”

      That is an issue with a financialized rentier society. Entities want to own assets(land) so they can collect rents. As an economy and population grows, rents rise, particularly with inflation. With relative scarcity of land to population, there is also more competition to buy, which pushes asset prices up and yields down. Financialization and FED funny money exacerbates this. High rent is a big contributor to those razor thin margins.
      When there is a stumble, various participants take a tumble.

      (Thank you for sharing your excellent commentary on the NYC market.)

  17. Jeff Relf says:

    Helicopter Money eases the pain,
    but doesn’t solve the problem.

    Mentally ill drug abusers need long-term care;
    instead, they’re running the asylum.
    Fix this and:

    — State-Sponsored Squatting will decamp.
    — Interest Rates will return to normal.

    — Asset Prices will deflate.
    — Bankruptcies will dethrone fraudsters.
    — Wealth Inequality will abate.

  18. Jeff Relf says:

    Trυmp is a real estate investor/bⅰllionaire.

    Lots of these real estate guys are bⅰllionaires,
    and multimⅰllionaires — even the young ones,
    on YouTube — asset inflation personified.

    Rent inflation has been ignored,
    forcing fixed-income people to dⅰe
    in overcrowded shεlters/hospⅰtals.

    People are allowed to stεal, abuse drυgs,
    and squat, without consequence.

    In this way, money is flowing
    from the rⅰch to the poor.

    Will there be fewer rⅰch people now ?
    I doubt it.

    • Frederick says:

      Good The prices for things and rents have gotten insane I agree Hooefully a lot of these guys will get an education in the near future

  19. Wisoot says:

    Forgiveness is a beautiful thing

    • Frederick says:

      It may be beautiful for the debtors but not so much for the creditors

  20. MD says:

    Conspiracy theory rubbish.

    • HowNow says:

      Conspiratorial thinking is directly proportional to low self-esteem. Facts are like needles, thinking hurts their heads.

  21. timbers says:

    Could this be done with social distancing practices tailored to the specific trades needed?

    “Under New Deal programs, the government hired about 60 per cent of the unemployed in public works and conservation projects that planted a billion trees, saved the whooping crane, modernized rural America, and built such diverse projects as the Cathedral of Learning in Pittsburgh, the Montana state capitol, much of the Chicago lakefront, New York’s Lincoln Tunnel and Triborough Bridge complex, the Tennessee Valley Authority and the aircraft carriers Enterprise and Yorktown. It also built or renovated 2,500 hospitals, 45,000 schools, 13,000 parks and playgrounds, 7,800 bridges, 700,000 miles of roads, and a thousand airfields. And it employed 50,000 teachers, rebuilt the country’s entire rural school system, and hired 3,000 writers, musicians, sculptors and painters, including Willem de Kooning and Jackson Pollock.”

    • nick kelly says:

      Carriers came in handy.

    • Lisa_Hooker says:

      And with all those good works (excepting perhaps the bad investment in de Kooning) we were left with debt and didn’t pay off. We shuffled along awhile. Then we went further into debt we did not pay off. And we did it again, and again. We’ve gone from indebtedness for ourselves to indebtedness for our children who had no say, and now for our grandchildren and greatgrandchildren and greatgreatgrandchildren yet unborn. Current debt cannot be paid off – the debt is a blatant lie to the people.

  22. If this story had been about the US? CRE is a nerdy business and the UK is times two. The unintended consequences of government policy, confirms my suspicion that the global financial decision makers are making things worse. The Fed is killing us. The Mortgage bankers asked them to back off their balance sheet operations for MBS, and their REPO is un-subscribed. CRE turns slowly, properties stay vacant a long while, even when the economy is strong. I sort of imagine what happens when you can’t get TP at the super because the store is closed, (after the landlord goes bankrupt) and you can’t order TP at Walmart, because, well, you just can’t. If I had managed to stockpile masks I would be using them.

  23. OaklandGB says:

    World wide, businesses are nearly universally shut due to no fault of their own. Now, we express alarm at the clear, obvious, and unavoidable results? Are you kidding?

    Reminds me of a guy who goes to live with the wolves, and then his friends are all aghast when the wolves kill him.

    All actions have consequences.

    • Xabier says:

      In the UK, firms I buy from that have been trying to meet demand online are now rationing orders and in some cases just giving up: ‘See you after the lock-down ends’.

      But will they?

      This senseless economic demolition, sweeping away even good businesses is far, far worse than the disease.

      • Xabier says:

        PS Not that I am suggesting that the insane real estate bubble, pernicious in its effects, didn’t need bursting.

      • char says:

        The disease would kill business too. It is not that if people would not take action if it wasn’t forced upon them by the state. No government action but only individual action would probably lead to more economic demolition.This is what the Let-it-rip crowd don’t get.

  24. Bruce Turton says:

    Interesting commentary throughout. Interesting also that no one ever mentions the banks!! Will that group have to shoulder any of the downfall that is being perpetrated on most of us? Will that group have to forego their $$$ like the landlords and renters?

    • The charters are almost GSE’s. They are priced as though they are capitalist enterprises, and one might suppose that investors see this group as the pinnacle of financial socialism, they keep the profits, we (taxpayers) backstop the losses. To my thinking they will have their Fannie Mae moment, nothing coming in and a pile of liabilities going out. The revenge of the yield curve, nobody wants to borrow and everyone wants the interest on their deposit.

  25. ML says:

    I work in the UK retail property market and can assure you that is nothing like as dire as the headline grabbers would have us think. Almost all the big retailers that have gone broke in recent years have done so through every fault of their own. Not every landlord is mortgaged to the hilt and gearing is often under 30%.
    Intu problems are debt related. The auction houses are selling lots without difficulty. Important always to remember is that retailers are adept at selling, including selling the idea they cannot afford the rent.

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