US Commercial Real Estate Prices Plunged in April, Mall Prices Collapsed

Tenants’ collapsing one after the other without replacement has a pernicious impact on property prices.

By Wolf Richter for WOLF STREET.

Before the coronavirus, some segments of commercial real estate (CRE) were red hot, others were hanging in there or declining, and one sector, malls, has been in deep trouble since 2016, with prices plunging. Then came the lockdowns. Property prices in every CRE segment fell in April, even those that were red hot. And prices of mall properties got crushed.

The overall Commercial Property Price Index (CPPI) by Green Street Advisors had peaked in the period of November 2019 through January 2020. In February and March, it ticked down. In April it plunged 9.4% from March, the second largest percent-drop in the data going back to the 1990s. The largest drop was 10.9% in October 2008, following the Lehman bankruptcy. Since the peak in January, the index has dropped 10.7% and is back where it had first been in May 2015:

There is sudden chaos in the industry, and the index designed to capture movements in near-real time has trouble capturing the massive month-to-month upheaval.

“The exact numbers are debatable, but property pricing is down about 10%,” said Peter Rothemund, Managing Director at Green Street Advisors, in the report. “Some property types, industrial for example, are probably faring better than that. Retail and lodging values are most likely doing worse.”

“There’s been plenty of examples of blown deals and people walking away from deposits, but the best way for us to get a sense of where things would clear these days is by talking with people in the marketplace — buyers, sellers, brokers,” he said.

During Financial Crisis 1, CRE prices collapsed nearly 40%, according to the Green Street CPPI, including in the middle the 10.9% cliff-dive in October 2008, following the Lehman bankruptcy. From the bottom in May 2009, the index more than doubled to the peak in January 2020. Now it’s back to May 2015 level.

Prices of malls collapse, all CRE sectors get hit

The sub-index of the CPPI for malls collapsed by 20% in April from March, and is down 33% over the past 12 months. The index had peaked in 2016 and has since swooned by 45%. It’s by far the worst-performing sector of the CCPI.

The other segments of the CPPI all dropped in April, but some dropped from record highs such as Manufactured Home Parks (trailer parks) and student housing. Lodging has been weak since 2015:

CPPI Sectors Index %,  Apr from Mar
%, 3 months %  YoY
Mall 77.0 -20% -25% -33%
Strip Retail 95.5 -15% -15% -13%
Apartment 140.1 -10% -8% -3%
Office 107.2 -9% -8% -6%
Industrial 158.8 -5% -4% 7%
Health Care 132.8 -5% -7% -5%
Lodging 91.4 -7% -16% -16%
Manufactured Home Park 227.7 -6% -2% 11%
Net Lease 90.0 -8% -9% -9%
Self-Storage 175.7 -5% -6% -2%
Student Housing 136.5 -12% -12% -9%

The chart by Green Street Advisors (below is a 13-year version of the 23-year chart) shows to what extent prices of some property types have shot higher in recent years, particularly Manufactured Home Park (top gray line) while prices of mall properties (dark blue line) have collapsed. Even Industrial (green line, 3rd from the top in April), which includes warehouses and fulfillment centers that were red-hot due to the surge in ecommerce, has dropped in April. No category was spared:

The price collapse of mall properties will continue because tenants are collapsing.

Retail properties have been in a terrible mess for years, as their brick-and-mortar tenants succumbed one after the other to ecommerce. This has already wiped out categories such as CD and video stores, and it is wiping out the icons of American shopping: department stores and clothing stores, with some of the biggest chains having already gotten dismembered in bankruptcy court, including Sears Holdings. And even the survivors have shed tens of thousands of stores over the past three years, as “zombie malls” became a meme on the YouTube.

Now come the lockdowns, and the whole process that would have taken a few more years to play out is condensed into weeks and months. This is reflected in the 45% collapse of prices at mall properties since 2016, amplified by the 20% plunge in April.

The list of retailers now on the verge of filing for bankruptcy or having already filed since the lockdowns is getting longer by the day, as is the list of retailers that have announced permanent store closings since the lockdowns began.

This morning, Stage Stores [SSI], with over 700 stores, announced that it filed for Chapter 11 bankruptcy and plans to liquidate unless it can find a buyer.

Neiman Marcus, a luxury department store that last year still had 45 Neiman Marcus and Bergdorf Goodman stores and 24 Last Call stores, filed for bankruptcy last week, latest chapter in a long saga that now involves $5 billion in debt that resulted from a leveraged buyout in 2005 by private equity firms Warburg Pincus and TPG. They sold the retailer in 2013 to Ares Management and the Canada Pension Plan Investment Board (CPPIB) for $6 billion. Ares and CPPIB have been pummeling creditors with the threat of a bankruptcy filing since early 2017 in order to push them into a debt restructuring where they’d get a large haircut. Now they did.

J.C. Penney is preparing to file for bankruptcy as soon as this week and plans to permanently close about a quarter of its 850 or so stores, sources told Reuters last week. The company missed a $17-million debt payment last Thursday; its grace period expires this Tuesday and would trigger a default. It had already missed a $12-million debt payment on April 15; that grace period expires this Friday. J.C. Penney has long been on my list of bankruptcy candidates, causing me to write in July last year, I’m in Awe of How Long Zombies Like J.C. Penney Keep Getting New Money to Burn. But Bankruptcy Beckons .

Lord & Taylor, which has 38 department stores, said last week that it plans to liquidate its inventory once the lockdown allows it to reopen the stores as it will likely file for bankruptcy where it expects that its remaining assets will be liquidated.

J.Crew Group, which was subject to a leveraged buyout in 2011 by PE firms TPG and Leonard Green & Partners, filed for bankruptcy last week and hopes to avoid liquidation, after having come to an agreement with its creditors to reorganize its debts. Creditors will get 82% of the new company. These types of reorganizations lead to many stores being shuttered, and usually end up back in bankruptcy court for liquidation. Brick-and-mortar retailers are devilishly hard to restructure successfully.

Nordstrom, which has a thriving ecommerce business that was already over one-third of its total revenues before the lockdowns, announced last week that it is planning to shutter 16 of its stores.

It has been an intense litany that will continue. Tenants’ collapsing and disappearing one after the other without replacement has a pernicious impact on property prices. The whole CRE sector of mall properties will have to restructure, and much of it will have to be repurposed, and lenders and holders of commercial mortgage-backed securities will have to take their licks – but instead of having many years or even a decade to deal with it, hoping to get out of them before it happens, they’re caught up in it right now.

It just can’t catch a break: Friday after hours, United Airlines disclosed that it abandoned its junk-bond offering after investors balked. Shares fell. Read..It Gets Rough for US Airlines: Why Buffett Dumped His Airline Stocks Though There Was Blood on the Tarmac, Which Should Have Been a Buy Signal

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  171 comments for “US Commercial Real Estate Prices Plunged in April, Mall Prices Collapsed

  1. Iamafan
    May 11, 2020 at 2:06 pm

    You are probably better off showing the numbers before private equity swooped in to buy mobile home parks. The look deceptively positive YOY.

    • May 11, 2020 at 3:17 pm

      Way too late… the swooping was done years ago — hence the price surge that you see over the priod. Over the past few years, some of the biggest PE firms have plowed into mobile home pars, including Carlyle Group, Apollo Global Management, and TPG.

      • Michael Fiorillo
        May 11, 2020 at 3:43 pm

        Poverty is lucrative… for a few.

        • Brant Lee
          May 11, 2020 at 4:58 pm

          I’ve seen some mobile home parks that were actually nice and great for retirement. A security fence around the complex was nice and restrictions kept the places tidy. One even had a centralized garden space with a section for everyone.
          But I suppose when the PE firms come along, things changed.

        • Boomer
          May 11, 2020 at 6:35 pm

          Rent control a factor in some mobile home parks in expensive markets. Some of these outfits attempt to overturn local ordinances by outspending municipal governments.

    • exiter
      May 11, 2020 at 8:03 pm

      Rentier pain.

      After all the hard-won laws and loopholes and tax-gimmicks that cost millions, even billions in influence peddling to create those privileges, and now SARS-Covid2 suddenly threatens to undo the fraudsters’ futures…anyway, most of them long ago already hedged their risks/vulnerabilities by parking fortunes offshore, etc. [the “etc” unknown to outsiders or short-termers.]

  2. Mark J.
    May 11, 2020 at 2:12 pm

    Liquidation sale, for sure…and it won’t just be retailers.

    • Trinacria
      May 11, 2020 at 6:09 pm

      Won’t this affect the property taxes at some point in the near future that will be paid to the counties? Will just add more fuel to the counties and states lining up at the federal trough for bailouts.

      I think residential real estate prices will hold though, because SoCaljim said so and he has boots on the ground !!!

      • char
        May 11, 2020 at 7:07 pm

        Retail is a big employer and keeps money inside the community, at least more than Amazon. A lot of towns will disappear without the income that retail generates for its inhabitants. A lot of towns in rural areas will disappear.

        • Thomas Roberts
          May 11, 2020 at 9:43 pm

          Char,

          That isn’t inherently true. Whichever way to buy goods is the cheapest, will benefit the local community the most. Small locally run stores typically have to pay distributors and end up sending more money out of the town than any other method. Costco and sams club are the most efficient. Made local and sold local is even better, assuming it’s done efficiently “if the price is compatible to bigger stores”.

          The loss of jobs matters and, because, everyone else should be saving money, hopefully, they will spend that money on something that generates jobs in the local community.

        • char
          May 12, 2020 at 8:20 am

          @Thomas

          First you use cheapest and then you use an import-export model of a town(region). You can’t do both

          B&M mall retail has one of the biggest local spending part outside local taxes and services that are directly done by humans.

        • Thomas Roberts
          May 12, 2020 at 9:54 am

          char,

          If a city can make and sell stuff locally efficiently, that is the best model. Paying B&M stores that have a large markup a premium, does bring in some tax money for the city, but, those people now have less money to spend elsewhere, and usually results in a larger amount of money leaving the city. The vast majority of stuff at a local store comes from out of town. It’s best to buy that stuff in the cheapest way possible like Costco. This leaves the city residents with money to pay for local services like restaurants and more, which keeps a larger amount of money in the community. Will they spend that money locally?

          This is course is a generalized example, it’s up to you to figure out what it means. If everybody has to thoroughly explain everything, this entire comments section would be full of essays.

        • char
          May 12, 2020 at 4:41 pm

          I used the word town which is an indicator of a much smaller community than a city. And cities in today’s world aren’t close to being autarkic.
          You can’t expect a town to sell services make stuff outside those that are normally offered by comparable size towns.

          A lot of small towns that are the center of a region lived of mall retail, restaurants/bars, supermarket retail, state functions(police/school/hospital/local government),tourism, gas station. Mall/restaurants/tourism will be gone this year and gas station will be gone with the electric car. That leaves state functions & supermarket but their size depends much more on the population of the town than that of the region.

      • Frederick
        May 12, 2020 at 1:32 am

        He’s also a real estate broker so take what he says with a grain of salt

        • Trinacria
          May 12, 2020 at 9:05 am

          indeed….no wonder they say that it is ONLY 98% of real estate brokers that give the other 2% a bad name ….

        • Broker1252
          May 12, 2020 at 3:37 pm

          Trinacria, I am the one of the 2% you speak of. But I guarantee that gentleman understands his profession and the economy. Perhaps better than you do your profession. I wonder what percentage your contemporaries would assign to you.

  3. David Hall
    May 11, 2020 at 2:15 pm

    Stage Stores with their 700 retail stores was reported bankrupt within the past 24 hours. Their Bealls clothing stores were popular before the pandemic.

    Business Insider reported 12 retail and restaurant chains have become bankrupt in 2020.

    Retail stores were nearing liquidation in 2019 due to online competition.

    • JC
      May 11, 2020 at 2:55 pm

      A quick look at Stage Stores reveals they have no online shopping service. Their website may have been neutered due to bankruptcy if not, it means they had no online retail…seems their business model was never going to survive. Reminds me of Bon-Ton.

      • char
        May 11, 2020 at 7:12 pm

        I don´t know if they belong to the group of of clothing retailers that compete with the salvation Army on price, like Primark. They are so cheap that delivery is not feasible so no web sales.

  4. ru82
    May 11, 2020 at 2:19 pm

    I was hoping to be able to get a good deal on a used car. I have been looking on Autotrader and craigslist the past monht.

    AutoTrader available inventory for used cars has dropped from 19k prior to the March 14 lockdown to about 12.5k now . That is a 34% drop in inventory for sale

    In all honesty, it looks like prices have gone up a little . Not sure what to think.

    I heard that auto companies have a lot of incentives for new cars right now. Maybe I am just not looking in the right place. Any suggestions.

    I took a look at some trucks but they seem to range from $45k to 70k for a 4 door. Crazy.

    • doug
      May 11, 2020 at 2:24 pm

      wait a few months.

      • Candyman
        May 11, 2020 at 2:44 pm

        I could be wrong, but I think the time to act is now. Auto manufacturers have stopped production, so don’t think in a few months prices will drop, as supply will be low. Therefore, used cars will be more in demand, price will go up. Now, before major reopening of dealers, I think would be a time to get a better deal.

        • Harrold
          May 11, 2020 at 2:48 pm

          In about another month or so, once the banks start the repo process, there will be a lot of used automobiles on the market.

        • May 11, 2020 at 3:28 pm

          Candyman,

          There are something like 3 million rental cars, most of which sit unused on parking lots with no place to go. They’re collateral. If lenders take those cars (which is what would happen in a Hertz bankruptcy, for example), then the lenders are going to send them to the auction. Everyone in the industry is afraid of that now.

    • GSW
      May 11, 2020 at 2:48 pm

      Also – Dealerships that are closed or have no room have no way to take possession of lease trade-ins that were due 3/31 and 4/30.

      So there might be a good numbers of cars out on lease that are overdue to be traded in, but cant be. Therefore, the lessee gets a free month of driving it until there is room on the lot for the trade-in. Could be some pent up supply coming off lease once things open back up.

    • WES
      May 11, 2020 at 3:11 pm

      Ru82:

      If you show up now wanting to buy a vehicle, the dealers will probably consider you to be one of the impulsive types who can’t wait and will try and convince you that you need to buy now because prices are going up!

      Just wait until this phase passes and reality sets in for the car dealers.

    • Petunia
      May 11, 2020 at 3:11 pm

      I just saw a video of the airport parking lot in Palm Springs, CA. It looked like there were a few thousand idle rental cars there. If Hertz declares bankruptcy their cars will probably go on the block. They will have to be really cheap to move now.

      • Frederick
        May 11, 2020 at 3:21 pm

        Jerimiah Babe Yes I saw the same video this morning

      • Boomer
        May 11, 2020 at 6:40 pm

        Watch the Micah Muzio LA Helicopter flyover YT’s. Quite a few parking lots jammed with idle rental cars. Trucks may be a different story. Looks like rental pickups are hot bargain items.

      • MC01
        May 12, 2020 at 5:37 am

        Hertz has earned a stay of execution from creditors for now, but that window of opportunity will close on May 22 already.
        A chapter 11 bankruptcy right now would be disastrous for Hertz creditors: senior secured creditors don’t want to be stuck with a car rental company right now, junior/unsecured ones risk walking away with zero dollars to their name and shareholders would be wiped out. That’s why all parts involved have every interest in working out a deal: eating a lot of losses is much better than walking away empty-handed or, perhaps worse, owning a car rental company which needs strong guidance in the completely unknown post-emergency and recovery phases.

        If a deal is worked out before the deadline expect shares and perhaps bonds to bounce back and present investors to cut their losses and counting their lucky stars.

    • May 11, 2020 at 3:20 pm

      On Mint, my car’s value when from $5000 to $6000 over the last month.

      • Harrold
        May 11, 2020 at 5:01 pm

        Sell Mortimer, sell!

    • mr wake up
      May 11, 2020 at 3:20 pm

      Crazy thing is 2015 was a time that most seasoned people in the industry starting calling a peak! Started sending warning signs – lets prepare for a correction hahaha…. an election changed that dynamic & then 4 years later a virus!

      Still this is only the “beginning” not the end of the beginning.

    • May 11, 2020 at 3:23 pm

      ru82,

      The used car market has frozen up. Wholesale volume plunged by something like 70% — no buyers (dealers). Everyone is waiting. No one wants to be stranded with inventory. Wholesale prices are down about 10% in April. But on retail lots, much of what you see is from before the lockdowns, and their COST is the old cost, and dealers are reluctant to lose their shirts.

      This market is totally screwed up. It needs to unfreeze, with more wholesale volume going through, and it needs more retail volume. Over the last two weeks, there was an increase in wholesale volume, though it was still terribly low.

      • Tim
        May 11, 2020 at 3:57 pm

        Ti Tim

        But, just maybe, these cars will continue to sit there as cash poor buyers look to older cars they can get 20000 miles out of with no depreciation.

        Taking potentially higher maintenance costs as a gamble.

        Iwonder if the most difficult car to get hold of will be a 10yr old honda civic/toyota tacoma with less than 150000 on the clock…

        Maybe if you want to trade cars, there’s a better market.

        (Buyer obviusly beware, have good working knowledge or friendly mechanic)

        • Endeavor
          May 11, 2020 at 5:38 pm

          A good $5000 used vehicle will still be $5000 6 months from now. It’s the $20k used vehicle that will drop double digits.

      • MCH
        May 11, 2020 at 4:51 pm

        in other words, the water is rising, and the sandbags for the dam are running out?

        then it’s only a question of when the level of the water overcomes the pace at which sandbags are being put in.

        At which point, flood of used cars?

      • Sit23
        May 12, 2020 at 2:19 am

        Maybe they can sell them at a loss but make up for it with volume!!

    • Tim
      May 11, 2020 at 3:48 pm

      Tin Tim

      Not just commercial real estate.

      Classic and vintage car bubble will pop over the next 2-3 years too.

      Fair price for a 1960’s Porsche 911S, well-restored or in good original condition, could be $20000-25000. It’s not considered that now.

      And for wine held as an investment….North bank, south bank, whatever ban…. ouch.

      • California Bob
        May 11, 2020 at 11:05 pm

        re: “Classic and vintage car bubble will pop over the next 2-3 years too.”

        From what I’ve seen, there are two classic/vintage car markets (I follow them pretty closely). One market is ‘high dollar;’ restored Duesenbergs, Bugattis, Ferraris, etc.) and the other is the ‘Everyman’ cars (muscle cars, 50s/60s/70s American and British and Italian mid-price sports cars, etc.). The 1% will continue to acquire the high value autos–as they will other works of art and properties–but Everyman will not be able to buy the 70s muscle car he dreamed of in high school, or may have to sell his if he owns one. This is pretty much what happened after the GFC.

        I just sold my late father’s ’65 Mustang convertible below market, but the idea of having a bunch of tire-kickers coming around my elderly mother didn’t appeal to me, and I don’t have the time to prep it for BaT. The car went to a soon-to-be 16YO girl, and I know my dad would approve.

    • Jon
      May 11, 2020 at 4:20 pm

      You need to wait few months I guess. Dealers would like to hold onto inventory for a given price for as long as they can

    • jdog
      May 11, 2020 at 7:44 pm

      Be patient. We are going into depression and used cars are going to be falling in value big time.
      Or buy now and kick yourself later….

    • mr wake up
      May 11, 2020 at 9:29 pm

      Ladies and Gentlemen come on down to the main Covid Summer event!

      Our dealers are getting ready to sell 2021 models and we have many, many, many – I mean an abundance of vehicles to choose from we have 2019 and worst of all we still stuck with some of those pesky 2018 models too!

      Come now as the Covid summer extravaganza is going on…

      The carry every month is worst than the summer burn from over overdosing on vitamin D!

      You can get a deal off the limited supply plus whats better than no down payment, and no first payment, matter a fact – no payment for four months, plus 0% APR too!

      That’s right not only we selling at a loss we so desperate we willing to let you take the new vehicle for the next four months with no payment!

      Title taxes not included please consider throwing the salesman a small tip as he made no money on the sale and a 4 star online review will get you a set of free Gorilla mats :(

      • MC01
        May 12, 2020 at 1:20 am

        Throw in a set of those giant fuzzy dices you hang from the rearview mirror and you got yourself a deal.

    • Paul
      May 11, 2020 at 11:35 pm

      I buy auction cars. I’m a mechanic and its fun to ride around in disposable $400 20 year old civics. Unless you absolutely have to buying a car right this second is impulsive.

      As i see it:

      If you wait a few months, and it all goes swimmingly you may pay $500? more.

      If it doesn’t go well, you are pretty much guaranteed to have overpaid, and when you’ll maybe miss the cash worse.

      Which position is better? FOMO is one thing when we know whats gonna happen. Its another when this is the only pandamic / shutdown you’ll probably ever live through.

      Most auto loans are silly high. Used cars are exspensive because the buyers who can even afford them are goofy. I have seen plenty 19 year olds sign $15k notes!

      Whats that going to do?

      • char
        May 12, 2020 at 8:29 am

        Two lockdowns, America opened way to soon and will need to close for a second time

  5. Eric Ma
    May 11, 2020 at 2:43 pm

    Some of the shopping mall’s market value down to $0 is not a dream!

  6. JoAnn Leichliter
    May 11, 2020 at 2:44 pm

    It will be interesting to see what happens to see what happens with office real estate, as more employers realize that much of what was done in an office building can be done just as well–and with much lesd overhead–by employees working from home. Just how much will our pandemic experience accelerate the decentralizing of the workforce?

    • Harrold
      May 11, 2020 at 2:47 pm

      Management is not going to let employees work from home any longer than required by law.

      • WES
        May 11, 2020 at 3:03 pm

        Harrold:

        I agree, most managers, need to justify their positions.

        People forget that aspect of human nature.

        If employees can work from home, and be productive, then who needs managers!

        • Frederick
          May 11, 2020 at 3:24 pm

          Now you’re sounding like an anarchist Expand that thought to most governmental nonsense that we could very easily do without

        • Tim
          May 11, 2020 at 4:04 pm

          If the firm goes bust, whose gonna come collect the laptop…. Start point for your own next business….. :)
          Tin Tim

      • gorbachev
        May 11, 2020 at 3:07 pm

        Agreed.Employees do way more work at the office.

        • WES
          May 11, 2020 at 3:34 pm

          Gorb:

          Well that is what managers will tell their bosses!

        • Zantetsu
          May 11, 2020 at 10:13 pm

          Well I personally am more productive at the office. YMMV.

      • The Count
        May 11, 2020 at 3:21 pm

        I agree. Big tech companies are not happy about their IP running around on everybody’s home WIFI networks even with the use VPNs. The VPN isn’t always connected but that IP in some cases still resides on the machine not protected the way it was inside the companies buildings.

        • Jon
          May 11, 2020 at 4:22 pm

          A lot of companies would see this work from home is working from them and thus would try to save money on office real estate
          work form home is a trend which is picking up from last few years but now this covid19 has squeezed the 5 year timeline in 3 months or so.
          I can see more and more company encouraging work from home..

        • Harrold
          May 11, 2020 at 5:04 pm

          Strange how companies would not want their IP on an employees home computer but have no issues outsourcing to a foreign company in China.

        • Tony22
          May 11, 2020 at 6:33 pm

          Hmmmmm…is it worth it to have my ‘intellectual property’ on Karen’s laptop at her Santa Monica apartment?
          How about if I give Karen’s job to Kashmiri in Karachi? The labor savings will offset the IP risks for sure!

    • timbers
      May 11, 2020 at 3:37 pm

      I’m interested in seeing how the conversion to “open office” layouts – with emphasis on compressed side-by-side seating with no barriers, greater density, no partition or walls or employee seperation, community desks/seats – gets reversed.

      My just spent almost a year converting it’s old much more Covid layout, to Covid friendly speading “open layout.”

      A lot of mney wasted, plus new money will be need to reverse the conversion.

      • Zantetsu
        May 11, 2020 at 10:15 pm

        You’ll wear your cubicle walls on your face.

    • David Hall
      May 11, 2020 at 4:34 pm

      The shift to work from home status has office building landlords worried. There has been a large drop in office leasing activity in some areas including Houston, NYC and San Francisco.

  7. SD Yeti
    May 11, 2020 at 2:57 pm

    we bought a car that we negotiated the price via email. Did all the paperwork via a portal and they delivered the car to our house. It could not have been easier!

    • Anthony A.
      May 11, 2020 at 5:37 pm

      New car? That’s easy! Used car, that’s risky.

      • Thomas Roberts
        May 11, 2020 at 9:05 pm

        Anthony A.,

        I definitely agree.

        It would be pretty insane, if buying used cars online became the norm. But, I could imagine it happening. Very few issues at first. The issues, the issues come later.

        • May 11, 2020 at 9:45 pm

          Thomas Roberts,

          I would be OK buying 1-to-2-year old cars online (mostly rentals or off-lease), if you return them if there are issues (such as a smell or a mechanical problem, which is not common in those cars, and they may still be under warranty). The most important difference in those cars is mileage and major body damage (repaired). And they need to be disclosed.

          The problem I would have is with older cars. A 6-year-old car is very unique in so many aspects. You really need to look at it carefully, drive it, smell it, touch it, etc. I would really, really hesitate buying something like that online.

        • Thomas Roberts
          May 12, 2020 at 9:37 am

          Wolf Richter,

          True,

          But, I wonder if enough people and car rental lots will be able to continue to own/lease brand new cars for only 2 years, that it would be a significant enough portion of the used car market.

          Also, the newest cars have mostly stopped/greatly slowed looking nicer every year, they are looks wise increasingly stagnant. They are some things they could do like, make more complicated paint jobs standard. In terms of the basic look inside and out though, cars may have peaked. New styles, not necessarily better, but different, could become the norm. But, if automakers cannot make the new cars enticing enough constantly, even the buyers, who can get a new car every 2 years, may lose enthusiasm, and instead own for 3 to 5 years.

  8. WES
    May 11, 2020 at 2:58 pm

    It was supposed to be a game of musical chairs.

    Where everybody danced near the exit.

    They closed the door before the music stopped.

    Nobody got out.

    • exiter
      May 11, 2020 at 8:42 pm

      …They closed the door…

      Do you know who “they” is?
      Could be the multi-generational families who, without exception, are by deliberate design immune to peaks and valleys of net worth. and rarely ever do that calculation. Their entire attention is on sustainability of their status.

      The “no exception” part does depend on long-range planning based on the accumulated wisdom. If that is ignored by some newbie, [e.g. hiring a manager not inherently tied to he family’s future] then it can introduce catastrophic risks.

      I do not speak from experience; just an observer.

    • California Bob
      May 11, 2020 at 11:36 pm

      OT, but reminds me of one of the late, great Mitch Hedberg’s jokes. He was at a venue and a security guard told him he was blocking the fire exit; his retort: “If you are flammable and have two legs you are NEVER blocking a fire exit.”

      If he was still around I’m sure he’d have some great comments on the ‘crisis.’

    • Sit23
      May 12, 2020 at 2:27 am

      Wrong. Remember the politicians who attended Covid-19 meetings, then rushed out and sold their shares before the resulting news was released. Then they stonewalled any queries until the reporters got bored. They, and their mates got out.

  9. Bobby Dents
    May 11, 2020 at 3:11 pm

    Not liquidating properly between 2016-19 was always going to set this up. There were signs of problems last January. IMO, this was one of the leading sectors of the next recession. By summer I saw prices falling, projects being scrapped(which was already starting). By fall it would have started infected the general economy.

  10. Seneca's cliff
    May 11, 2020 at 3:19 pm

    The scariest thing about the effect of the corona virus on CRE is that the part of B&M retail that was theoretically immune to e-commerce was the in-person services like hair stylists, nail salons, yoga studios and restaurants but those are the things being hit the hardest by the pandemic. So their is no real safe harbor in the CRE storm.

    • May 11, 2020 at 3:32 pm

      Seneca’s cliff,

      Yes, excellent observation!

    • raxadian
      May 11, 2020 at 5:37 pm

      Restaurants can still do home delivers but the rest? Hahaha.

      • Eric Ma
        May 11, 2020 at 5:53 pm

        Yes, restaurants can still do take-out and delivery. But many of them, the sales only able to cover the food cost, 2-4 employees wages, and part of the rent. Sooner or later, many restaurants, especially those with large dining area will be gone.

        • MiTurn
          May 11, 2020 at 6:22 pm

          My sister and her husband have a restaurant in the Portland metri area for years. They fired everyone (15+), keeping only two cooks on staff. Trying to keep it together on take-out only.

        • Dan Romig
          May 11, 2020 at 7:06 pm

          A few well established, quality restaurants in Minneapolis have simply called it quits.

          “The Bachelor Farmer, one of the state’s top restaurants, will not reopen.

          The closure is a reflection of the industry’s dire situation. In mid-April, the James Beard Foundation, the New York City-based culinary nonprofit, conducted a survey of 1,400 owners of small, independent restaurants. One startling response was that 4 out of 5 restaurant owners don’t expect their business to survive the COVID-19 crisis.”
          -Minneapolis Star Tribune on April 30

          An already tough business is now even more difficult – not to thrive, but just survive .

        • VintageVNvet
          May 11, 2020 at 7:35 pm

          Saint Pete, FL is allowing restaurants to open with 25% of capacity seating inside,,, plus allowing them to set up spaced seating on any available spaces outside.
          And I am seeing a report of a place putting up shower curtains between booths inside some places.
          Surely there are many creative solutions out there that will allow restaurants to at least break even for the time it takes for this virus to do its thing.
          Meanwhile, we had a wonderful delicious meal delivered to the door last week for a birthday party, with appropriate ”liquidity” included!

        • roddy6667
          May 11, 2020 at 8:50 pm

          Here in China, takeout was huge before the outbreak. Many restaurants do delivery only. There are armies of delivery guys on small motorcycles, mopeds, scooters, e-bikes, and even hoverboards that bring the food in insulated boxes on the passenger seat. This is low cost and efficient, all run from phone apps. When the lockdown hit, the business expanded.
          In America it costs 50 cents to a dollar a mile to operate a car, so home delivered food is expensive.

        • Thomas Roberts
          May 11, 2020 at 9:14 pm

          roddy6667,

          All those forms of transportation exist in America. In China it’s cheaper because of how little the delivery person is paid and because of how tightly packed Chinese cities are.

      • char
        May 11, 2020 at 7:29 pm

        Take out has a much lower max price than sitdown food and people save on drinks & desert. Both high margin menu items.

        • Thomas Roberts
          May 11, 2020 at 9:21 pm

          You can save money on drinks, but, restaurant drinks are often brewed stronger, it varies by restaurant. As for dessert, that too may be better than store bought.

          If you only get 1 thing at a restaurant, it may not be worth waiting for.

        • Swissbrit
          May 12, 2020 at 2:54 am

          Thomas,
          Are you implying that there’s different versions of say, Budweiser; one for shops to sell and one, stronger, that’s sold in restaurants?
          You know that’s nonsense, right?

        • Thomas Roberts
          May 12, 2020 at 7:34 am

          No Swissbrit,

          Drinks at a restaurant that you get out of a soda dispenser, say soda or possibly some other drinks. Are bought as a syrup, they are then mixed with carbonated water. The restaurant gets to decide how carbonated and how much water to add. Normally, restaurants just use the prescribed amounts. Some restaurants in my area and certain chains, in particular, make a stronger coke a cola that is way better than store bought.

          If the restaurant just has cans and bottles, it will be the same as everywhere in that country.

        • char
          May 12, 2020 at 9:48 am

          Post-mix. My experience is that it always tasted weaker. That is why i prefer to buy bottled or canned soda’s in a restaurant.

          @thomas

          I don’t see how ice-cream would work as a take-out dessert with a menu that isn’t eaten in 5 minutes. There is also the you-get-what-you-pay-for. Restaurants are more likely to serve the $5 a liter tube ice-cream than the average supermarket shopper. It does not mean that you cant buy the same ice-cream.

          about Coca Cola. It depends on the bottler and the water they use. Canned coke definitely tastes different from PET bottled coke. Could be because of light changing the bottled coke or because air gets in and CO2 leaves as plastic is almost but not completely airtight. Or it could be the chemicals that leach out of the container. I have seen restaurants in my country use PET bottles. small glass bottles, cans, cans bottled in Denmark, post-mix and a kind of small barrels (5l IIRC) and they all taste differently

        • char
          May 12, 2020 at 4:01 pm

          @swissbrit

          Beer from a tap/barrel tastes better than from a can/bottle. Everybody knows that

        • Thomas Roberts
          May 12, 2020 at 5:13 pm

          char,

          It definitively can go either way, whether soda is better or worse at a restaurant. Typically though, the taste is consistent at each restaurant, until they need to refill the machine.

          Ice cream is only one such dessert though. Most restaurants do have distinct tastes though for their desserts. Alot of things restaurants make are fresh as opposed to frozen like most stores. Also, culvers has custard for their ice cream, which very few stores have. They are lots of things like this your local food stores probably don’t have, that some local restaurants do make. Also, if you are picking up food yourself, some desserts like ice cream can be eaten right away.

          It all varies, but, if enough people just start getting takeout and skip high margin items, all the prices would change.

        • char
          May 13, 2020 at 11:00 am

          Restaurants “make”. That is synonym to buy from the restaurant whole-seller

    • ft
      May 11, 2020 at 7:40 pm

      My stepson and wife have a beauty salon in Fremont CA. With the virus scare, business was too slow in Feb to make any money. Now they’ve been shut down for eight weeks. The $6800+ monthly rent still must be paid. This can’t go on much longer.

    • Caticorn
      May 11, 2020 at 9:30 pm

      Yoga studios have been hit hard, yet the silver lining has been Zoom yoga. It’s been a learning experience,but it works.

  11. Fat Chewer.
    May 11, 2020 at 3:54 pm

    I’m going to miss department stores.

    • Lance Manly
      May 11, 2020 at 4:44 pm

      Was that meant to be sarcastic? I can’t think of anything much more depressing than going to a department store. Now a mixed use with specialty shops and restaurants, that sounds ok.

      • MiTurn
        May 11, 2020 at 6:25 pm

        LM,
        I concur. I hate department stores, especially with the constant “can I help you?” from bored staff.

        • PDneXt
          May 11, 2020 at 7:15 pm

          You haven’t been to a department store in a long time. There is no staff. Good luck finding someone to ring you up. Shrink must be ginormous.

      • Fat Chewer.
        May 11, 2020 at 11:01 pm

        You must have terrible department stores.

  12. TrojanMan
    May 11, 2020 at 3:59 pm

    In my experience Bay Area residential real estate is still hot in the low/middle end, 1.2 – 1.5 million. I went to look at one property and it had two offers, one accepted within 20 minutes after I looked at it. I made an offer at asking on another property and it was rejected even without a competing offer because the seller wanted to finish showings and setup a bid submission deadline. Sellers still have leverage and confidence at the moment. Yeah, yeah, I know there’s lots of unemployed but significantly most of those folks were not in the market for these homes.

    Inventory is limited right now but I am hoping new inventory starts to outpace buyers over the next couple months. Maybe a blessing in disguise I missed those two properties, but I have seen a lot of homes in that price range and those were the only two I thought were worth it.

    • Jon
      May 11, 2020 at 4:25 pm

      During last downturn, it took 4 years for real estate to find the bottom. Keeping this in mind, it is still too early in the game to expect any price decline.
      Price decline may or may not come but if it comes, it’s gonna take some time to show.

      • Tom Stone
        May 11, 2020 at 5:22 pm

        Real Estate prices are always sticky on the way down, it’s unlikely this downturn will be different if you look at Statewide or Nationwide numbers.
        At a local level it may well be different, and different classes and price tiers are likely to behave differently.
        Look at what has been built in SF over the last few years and what is nearing completion in that City.
        Who were ( And I do mean were) the buyers the developers expected to sell to?
        In Sonoma County we had ( and I do mean had) many thousands of legal short term vacation rentals, with least half of those belonging to small time entrepeneurs who bought anywhere from 2-10 properties and who paid a price for them that “Made Sense” based on bringing in 3-5 times as much as a long term rental would.
        Short term Rentals have been banned for several months and when that ban is lifted those owners will be competing for a much smaller number of tourists.
        Have I mentioned that when premiums were paid for AirBNB suitable homes it brought prices up across the board and that Real Estate is priced at the margin on the way down as well as on the way up?

        • Jon
          May 11, 2020 at 5:36 pm

          Thanks Tom for your insights from the ground!

        • dr spock
          May 11, 2020 at 7:22 pm

          great analysis, Tom…….nice to have an experienced real estate agent giving his honest opinions concerning northern California to everyone on this site

        • Michael
          May 11, 2020 at 10:06 pm

          So mr. Stone, when does one look for a single family home in Santa Rosa?

        • May 12, 2020 at 10:03 am

          Michael,

          You look for a home when you’re ready to buy a home. Just understand that a home is an expense, not an investment. At some point, the building will be worth zero and gets torn down. The land has value. But there are many costs associated with a home. Just make sure you can afford what you buy, and if it loses value over time, so be it. It’s not an investment but a place to live.

      • Tim
        May 11, 2020 at 5:43 pm

        Some will want a new home for Christmas.

        Some will hold on until after Christmas before admitting defeat.

        Perhaps there will be more to find Feb/Mar/Apr 2021?

        Tin Tim

      • TrojanMan
        May 11, 2020 at 6:55 pm

        At this point I would be happy with transparent prices and lack of competition let alone price declines.

      • roddy6667
        May 11, 2020 at 8:59 pm

        In CT, starting in February 1988, prices started their downward march. Eventually they bottomed out, but took a full decade to reach 1988 levels in many towns. Many homeowners went upside down in their mortgage. I was a Realtor, and it took a toll. I left the business, but not after achieving the personal finance trifecta of divorce, foreclosure, and bankruptcy.

        • Zantetsu
          May 11, 2020 at 10:25 pm

          Wow Roddy that must have been tough. You have some battle scars.

          I live in Sunnyvale CA and I’ve given up on ever buying any property here. I am saving my money for something cheaper when I move away. I have this plan to buy a few small properties scattered across the USA and live a nomadic lifestyle with stop-ins at my home bases every now and again. Maybe someday when we have self-driving RVs I’ll just go to sleep at one property and wake up at another.

        • Zantetsu
          May 11, 2020 at 10:26 pm

          By the way 1988 was an awesome year for me. I was 16 and had my first girlfriend, first car, and first job. Good times.

    • Seneca's cliff
      May 11, 2020 at 4:59 pm

      Who are earth is buying homes at bubble prices now? Anybody with a slight understanding of economics and history can see that home prices are on a roller coaster ride back to the year 2000 if not lower.

      • TrojanMan
        May 11, 2020 at 6:59 pm

        Life happens. There are lots of people in the Bay Area who can afford to buy and hang on. Your financial situation is not everyone else’s.

      • Engin-ear
        May 12, 2020 at 9:38 am

        Who buy homes?

        Pretty everyone who watches TV and had a decent credit score.

    • May 11, 2020 at 6:26 pm

      TrojanMan,

      In San Francisco, closed sales in April collapsed by 60% from a year ago, according to Compass.

      Sellers pulled their homes, buyers staying at home. There is now PENT-UP SUPPLY — and it will hit the market as soon as sellers don’t worry about potentially infected strangers walking through their house.

      • TrojanMan
        May 11, 2020 at 7:06 pm

        Thanks, Wolf. I agree and I hope that pent up supply outpaces pent up buying demand, but I only have a few months. At the moment the market still seems frothy. I am on the front lines and have had no trouble lining up tours for what inventory is out there as long as I sign the realtor’s COVID-19 disclosure and provide a prequal letter. We couldn’t believe our offer got rejected without a competing offer given the risk we would be taking on in this environment, but that is where the market is still at. Seller think they can underprice and drive an auction for record amounts. I think it’s insane but that is the reality. If he comes crawling back I’m dropping the price bigtime.

    • TheRealMRDyno
      May 11, 2020 at 6:52 pm

      Maybe you can explain to me how those houses are worth it. I’ve spent some time around the Tesla plant, houses near there for $700k are 1,000 sq ft ranches from the 1960’s with no garage or even driveway, with two cars parked in the tiny front yard and two more in the street. Pay in CA is higher than here in OH, but not remotely higher enough, obviously given the parking arrangements I see. From people I know there it seems like about 30% higher, vs what seems to need to be at least 130%. I saw a nearly identical house on a maybe 40×100 lot in Palo Alto for $3M, half a block from a Mattress King and a run down Baskin Robbins. Is the weather really worth it? Or something else? I seriously don’t get it.

      • Jdog
        May 11, 2020 at 8:02 pm

        The actual cost on a $700K loan is 1.1 mil over 30 years…..

      • roddy6667
        May 11, 2020 at 9:02 pm

        It is group psychosis. If it all makes sense, you are crazy.

      • DeerInHeadlights
        May 11, 2020 at 9:59 pm

        Ha ha. “Is the weather really worth it?” That’s what I’ve trying to figure out the whole time I’ve been here and looking to get a place. It’s insane. The answer IMO is that yes, it’s the weather AND proximity to the tech jobs. Physical proximity does help landing a gig at a well known, major player in the industry, not to mention the ease of hopping around to other employers with relative ease compared to someone who’s not here.

        The only thing IMO that can significantly affect prices here is a catastrophic earthquake (e.g. 7.5+) or a tech-specific calamity, financial or otherwise, which is hard to foresee at this point but you never know.

        • Zantetsu
          May 11, 2020 at 10:33 pm

          Outside of the few big companies awash in more revenue than they know what to do with (Google, Facebook, etc) I believe that most ‘good’ tech jobs are leaving SV. There are H1Bs coming in to plug the holes but the experienced developers here are increasingly just becoming team leads for remote teams in India and eastern Europe.

          I feel like the most cost effective way to do software development now is with a local expert acting as a back stop against truly bad design/implementation, with most of it farmed out to mediocre teams outside of the USA.

        • Zantetsu
          May 11, 2020 at 10:34 pm

          Also I kinda hate the weather here but I am outlier. I want to live in my refrigerator’s crisper drawer. Which is why I prefer the pacific NorthWest.

          Also I don’t mind winter and wish there was more of a change of pace from the spring/summer/two weeks of early fall/repeat of northern CA.

          But I am an outlier. Most people who live here think I am crazy for not loving the weather.

        • DeerInHeadlights
          May 11, 2020 at 11:19 pm

          Zantetsu,

          Fully agree with you. However, software’s not the only thing here. Even the software dev’s here who are on H-1B have purchasing power that exceeds the average in other parts of the country, not to mention have double incomes along with their spouses. This makes the rental market as well as housing expensive. The outflow from California now is greater than the inflow, that much is a fact. However, I’m not sure if for the tech workers there is a net outflow. I wouldn’t be surprised if it’s the non-tech ones who have been priced out by the techies and are leaving the state for cheaper states.

          Basically, there’s enough high-paid techies here that things weren’t really changing pre-Covid, except for a slowdown in the price increases after early 2018 and a respite in the bidding wars. With tech having been strengthened due to the remote-work necessitated by Covid, I don’t know if the RE situation is going to change much here.

        • Jackflash
          May 12, 2020 at 12:09 am

          Zantetsu,

          Also with you. Alas, I have no connections to Pacific Northwest so I’m leaving Bay Area for CO. People think I’m nuts but I find the weather here intolerably dull.

        • DebtWazoo
          May 12, 2020 at 7:21 am

          Jackflash, connections are optional. Just do it. I did, life is way better. Just keep at least two counties between yourself and King County and it’s all good.

          Now whenever I visit the Bay Area the weather seems like Arizona.

        • char
          May 12, 2020 at 9:55 am

          California also has better government if you look at the number of deaths caused by covid19.

    • Ethan in NoVA
      May 11, 2020 at 8:21 pm

      Coworker said a nearby house (rental) was put for sale. 3 bids rapidly. Someone bought it for their young kids, possibly bought it outright full cash.

      Northern Virginia.

      There is a townhouse not too far from me on the market for low 700’s that had to have been bought 3 months ago or less. It’s competing against the builders last unit. Builder can undercut the seller if the seller is in trouble. Could be a foreclosure in the future.

      Hoping the market crashes hard.

  13. Seneca's cliff
    May 11, 2020 at 4:11 pm

    Here in Portland there is a new type of office space termed “creative office.” These are usually old warehouses or factories stripped down to the wood, have windows and skylights added and then the workers sit next too each other on big reclaimed wood tables ( like picnic tables). They of course have espresso bars and couches to lounge on. Up until 2 months ago these rented for more than regular class a office. But with the workplace changes coming while the virus hangs around they seem to be especially useless. I figure the owners, and folks who invested in these places will be taken to the wood shed.

  14. Joe
    May 11, 2020 at 5:00 pm

    Tesla is opening in California and showing that being a billionaire, he’s above the current lockdown law.
    Showing what everyone has suspected on money talks and no one else matters.

    • Massbytes
      May 11, 2020 at 6:12 pm

      Well there is also the fact that Newsome has already opened all other manufacturing in the state and that Tesla has a playbook for re-opening based on their plant in China. Alameda county is just being obstinate, for whatever reason.

      • Miturn
        May 11, 2020 at 6:28 pm

        They hate tax payers, assuming Tesla pays taxes.

        • May 11, 2020 at 6:41 pm

          Tesla has never paid income taxes in the US. However, it received a huge amount of government subsidies, not only from the federal government but also from taxpayers in California, Nevada, and others states — from the very beginning. Tesla has milked taxpayers from day one, everywhere. And is still doing so today.

        • Just Some Random Guy
          May 11, 2020 at 6:57 pm

          “Tesla has never paid income taxes in the US.”

          How much have they paid in payroll taxes for the thousands of employees that draw a paycheck from them? How much tax have those employees paid? How much sales tax has Tesla paid? How much tax have all of Tesla’s American suppliers paid?

        • MCH
          May 11, 2020 at 10:47 pm

          At some point, someone will have to truly sit down and think about the concept of essential. It varies from state to state.

          The most obvious essentials are medical requirements and defense. But the semiconductor industry is considered essential by the Feds, I don’t know how Intel or AMD got classified, but there are other fabs in the US that are running or operating in more than limited capacity. One could argue that computer chips are nowhere near as essential as the manufacturing base for PCR systems used to detect C19, but it all depends on who is defining the term essential.

          After all, how essential are those factories making smart bombs? To the government, it’s damn well critical.

    • dr spock
      May 11, 2020 at 6:41 pm

      Joe, Musk is moving his factories to China and sharing his technology with them. We should revoke his citizenship and tell him to take his saddlebags and get the hell out of this country

      • roddy6667
        May 11, 2020 at 9:11 pm

        Do you remember not long ago when Tesla offered all their patents and technology for free? There were no takers. Tesla is a Mazda-looking car that uses 20 year old Li-Ion battery technology to drive 100 year old electric motor technology. The only proprietary tech they have is the battery management software that sets the cars on fire and the self-driving tech that crashes the car. China allowed Tesla into their country without a Chinese partner because their is NO tech to copy. When Tesla goes under, China will sell the factory to a local company. Meanwhile, it provides jobs at the expense of virtue-signaling shareholders and US government (taxpayer) tax subsidies.

        • Willy Winky
          May 11, 2020 at 11:50 pm

          Jim Chanos is correct when he says Tesla is worthless

          worthless
          adjective
          having no real value or use.

          For some reason no matter how much money it loses year after year after year…. the share price does not go to zero.

          I struggle to identify the specific reason but I suspect some entity with a lot of juice has decided Tesla is the poster child for the future, and Elon is the saviour. Killing Tesla would kill hope in the future.

          So Tesla becomes too important to fail?

      • MCH
        May 11, 2020 at 10:50 pm

        Here is the thing, do you want to do that to the same guy who happens to be making space travel for America viable again?

        People may call Musk a blowhard, but let’s face it, what he has done with SpaceX and Tesla is genuinely amazing. He has made electric cars possible for the mass market. He has turned the stodgy space travel run by an obsolete conglomerate ULA into something cool.

        All things aside, one could easily ask, how is he different from Steve Jobs, and I would say his impact is far more meaningful that the stuff Jobs has accomplished, even if the latter made far more money.

        • Willy Winky
          May 12, 2020 at 2:23 am

          Mass market? Hmmmm… how many cars does Tesla sell in a year? Hardly mass market…

          As for his space ventures — isn’t his gig supposed to be ‘green’.

          How does this fit into the ‘green’ thing (not that it will ever happen because radiation outside of low orbit will fry a human)

          I guess it fits in with his private jet – right?

          Elon Musk is a joke.

        • California Bob
          May 12, 2020 at 11:25 am

          re: “… radiation outside of low orbit will fry a human …”

          Boy, it’s a good thing we never tried to go to the moon!

      • Massbytes
        May 12, 2020 at 11:15 am

        Musk is not moving his factories to China. Tesla built one gigafactory in China. Another is currently being built in Berlin. And still another will be built in the US to build the Cybertruck and Semi’s. The amount of Tesla hating on this site is amazing. But no matter. They have no real competition, their profitability continues to improve and they continue to produce more EV’s, solar panels and battery storage.
        Their mission is to get fossil fuel usage massively reduced and they are doing a good job of it. The entire car manufacturing industry has had to change their strategies to deal with them.

  15. Bricks n Mortar
    May 11, 2020 at 6:07 pm

    Greenstreet has a great model, but there is no way they can estimate what is happening in CRE right now, at least in the retail segment. There really isn’t a bid for anything coming to market. Many deals have been pulled that were being marketed. The few deals that are closing are deals that were already under contract, and if they closed they likely had non refundable deposits and /or were part of an exchange.

    Rent collections are way off in retail compared to the other segments; who can or will hazard a guess on what the operating income will be next year with so many tenants struggling to survive. This isn’t just the traditional retailers, it includes many of the small businesses that we thought of as internet resistant.

    I don’t think we will have a good sense for how this will play out for many of these businesses until late in the year. How does a restaurant business survive using 25% of it’s seating capacity? The same dynamic will work against many of these businesses just in less obvious ways. They can have free rent and it still doesn’t work.

    For now we are going to see lenders allowing deferrals and accruals. The real repricing will come when the regulators start pressuring the lenders to reserve for losses on those loans and they start trying to sell notes or foreclose.

    While this pain really isn’t being felt in the industrial market, we will see how long they are immune to the effects of mass unemployment.

    One last note, I see the hotel business as the next to go through the re pricing/ distress mode, though the end game there isn’t the same as the mall business. (which is tear it down and redevelop)

    • Tony22
      May 11, 2020 at 6:46 pm

      “How does a restaurant business survive using 25% of it’s seating capacity?”
      Simple, they raise prices 400 percent.
      The future scarcity of restaurants, the lowering of wages for their help and the abundance of commercial food from all the closed restaurants will maintain profits, IF they are located in a wealthy area where people will be dying to get out in public.

      There was already a 400% price escalation when menu prices x portion sizes were taken into account in some cases. “That place can’t survive!” Yet it did, year after year. i.e. Sushi Ran in Sausalito. Home cooking is going to be restored. That is a good thing in my opinion. Same with caring for older parents, few are going to send them to the Ice Flow nursing home if they have a spare bedroom or a couch.

      • char
        May 11, 2020 at 7:43 pm

        They need less staff and the bought food is a something like a third of the sales price so 400% is not needed. It is more like 250% or 300%. But the ambiance of a restaurant is different with so few guest.

      • Jdog
        May 11, 2020 at 8:08 pm

        There are a lot of businesses that are simply not viable under the social distance guidelines. That is the fact of the matter.
        Social distancing will have to be abandoned rather quickly or we are looking at a whole different world going forward.
        The real problem is the psychological changes people have gone through will be much more of a problem. Once people develop a certain mindset, it is difficult to convince them to change.

        • urblintz
          May 11, 2020 at 10:33 pm

          It occurs to me that the very decent career I had singing opera – exhaling loudly on my colleagues – is over without more certainty behind infection/immunity/vaccine etc. and so. the end of social distancing. I taught many talented young aspirants at several Universities through 2013 and fear their path has abruptly disappeared…

        • Xabier
          May 12, 2020 at 3:45 am

          I fear many politicians who have no experience of any other enterprise than lining their pockets, cannot grasp the issues faced by most businesses.

          Talk to anyone working in the public sector about basic concepts such as margins, cash flow, fixed costs or footfall, and marvel at the blankness of their expression…..

        • char
          May 12, 2020 at 10:07 am

          Abandoned is the wrong word. It is not that the restaurants will be filled if only the state didn’t force distancing. What is needed is an end to the epidemy, than we can go back to normal. But some people think that you just can legislate doing as if it is gone and everything will be back to normal (except for the deaths and infirm)

      • Bricks n mortar
        May 11, 2020 at 9:33 pm

        68 % of restaurants in the USA are independently operated, and many more are independently owned franchises. Real people that support families, employees and communities. Many have there life savings invested in their business. I am sure that they would so appreciate your understanding and the genius business advice you offer. Wow if only I knew before that all I had to do was raise prices life would be so much easier.

      • MonkeyBusiness
        May 11, 2020 at 9:59 pm

        This comment does not make sense. Let’s take McDs. Would anyone pay 4x the current Big Mac price for a single Big Mac?

        That’s hyperinflation territory there.

        Restaurants CAN survive but it will take some renegotiation i.e. with suppliers, landlords, etc. If not then close and get a new lease.

        • Tony22
          May 13, 2020 at 11:47 am

          “Within wealthy areas” The only people that eat at McDonald’s around here are the staff working for the servants of the rich. i.e. peons working for the gardeners to the rich.

      • Engin-ear
        May 12, 2020 at 10:01 am

        “How does a restaurant business survive using 25% of it’s seating capacity?”

        It can’t if it respect the rules.

        But if the bankruptsy is inavoidable, why not to try to ignore the rules? It might just work.

        Yet the best solution is to run 1 month official ad, 5 minutes every hour, saying “oh happy news! Thanks to the wisdom of our leaders, the virus has just quit to the planet Earth”. I’m still hoping for this solution.

  16. Randy Oldman
    May 11, 2020 at 7:05 pm

    As a handyman I considered working from home, with a facetime connection I would coach my client through the job with an 80% discount- no takers yet.

  17. BuySome
    May 11, 2020 at 7:38 pm

    Think any retailers are going to be having blowout prices on the PM’s in stock, or just quitely packing it all up to go out the back door when things don’t look any better? Not planning a heist, just curious.

    • char
      May 12, 2020 at 4:59 pm

      You have companies that organize liquidating bankrupt stores. In Normal times they would organize a blow-out sale or the removal of inventory but now it wont surprise me if stores are just closed with inventory and all.

  18. A
    May 11, 2020 at 8:53 pm

    Shout out to all those landlords who turned entire Manhattan streets into ghost towns in the last 18 months. Kicking out historic resutraunts, bars, and huge retail tenants all in greed of thinking they could get top dollar.

    Now those landlords who ruined Manhattan are watching those hypothetical rents they thought they could charge go up in smoke while they lose money month after month with no tenants and none coming for a long time.

    Rot in hell and go to the poor house ya greedy bastards.

    • eg
      May 13, 2020 at 9:10 am

      Couldn’t happen to nicer people really …

  19. Citizen AllenM
    May 11, 2020 at 9:56 pm

    So now the problem of no cash flow beginning to finally come into sight.

    Money is going to be tight.

    And so much debt is going to be vaporized.

    And everyone is going to be amazed at how much crash there can be here.

    Now, one can begin to think how bad 1930-32 was, which is where we are going.

    The guy with the $6800 a month rent for the mail parlor? That money will never be paid over the next year, so quit now.

    Someday this war’s gonna end…

  20. Citizen AllenM
    May 11, 2020 at 10:02 pm

    Nail parlor, eh

    • char
      May 12, 2020 at 4:53 pm

      Aren’t nail parlors operated mostly by Asians. I think they will all go back home

  21. Augusto
    May 11, 2020 at 10:15 pm

    As commercial real estate collapses pressure will increase on governments to replace the lost local property and retail taxes with a special internet tax. Although business always pay a higher proportion of local taxes than warranted, their internet competition, the Amazons of the world have paid nothing. And since I doubt local governments are going to get it from residents/voters, than it will be the “Fair Share”, argument and the on line retailers if not others.

    • char
      May 12, 2020 at 4:51 pm

      How to implement the local special internet tax. A big question?

  22. Josap
    May 11, 2020 at 10:53 pm

    Citizen AllenM

    It seems the war never ends. But we survive.

  23. FinePrintGuy
    May 12, 2020 at 12:38 am

    Turn them into homeless shelters for the needy! It would be like an open floor plan prison. Imagine the noise level as they all scream at eachother!

    • BuySome
      May 12, 2020 at 1:30 am

      Already did that. Called them state hospitals. Conditions were so bad they decided to release them onto the streets and classify them as “homeless”. Wasn’t bad enough for them so we opened the prison doors and threw criminals into the mix in order to terrorize them. No wonder they scream.

  24. Michael Engel
    May 12, 2020 at 10:58 am

    1) Wall street gangs invaded Warren Buffett mfg home parks, lifting their value.
    2) When the lower income get divorce they fight and break the kitchen walls.
    3) A 5k repairs on 50K mfg home = 10%.
    4) A 10K repairs on 500K home = 2%.
    5) Warren Buffett sold shares, in order to beef up BRK
    cash reserve, because unlike 2009 V shape recovery, this time the economy
    will struggle for a long time.

    • char
      May 12, 2020 at 4:49 pm

      Breaking the kitchen wall during a fight with your soon to be ex wife.

      Proof you live in an American build house or that your secret identity is the Hulk.

  25. Michael Engel
    May 12, 2020 at 11:55 am

    1) Uhal plunged from 426 in Nov 2019 to 222 on Mar 2020, because
    nobody move.
    2) Strip retail shopping ctrs are down (-) 15% in 3M // Self storage are down (-) 6% in 3M, less than half.
    3) Uhal leased a large vacant space in a good shopping ctr with plenty parking space, near supermarkets, MCD, SBUX… almost for free, because of owners distress.
    4) When people move they lease a mini storage space using Uhal trucks.
    5) All Uhal have to do is to build partitions, that look like an open vault, garage for trucks maintenance & repairs and offices.
    6) A BK car dealership with a small retail space and a huge parking space,
    is useless.
    7) If JCP and/ or Macy’s go BK, malls will not open.
    8) Casinos or doctors offices are in very big troubles.

    • char
      May 12, 2020 at 4:46 pm

      The footfall of Uhal is even worse than that of a casino. And that says a lot

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