Brokerages close amid coronavirus crisis- but CA housing construction marches on

Despite shutdown, Gov. Newsom allows developers to keep building homes

TRD LOS ANGELES /
Mar.March 20, 2020 05:14 PM
Commercial construction projects may be suspended (Credit: David McNew/Getty Images)
Commercial construction projects may be suspended (Credit: David McNew/Getty Images)

While the coronavirus continues to spread, parts of California’s real estate industry are grinding to a halt because of Gov. Gavin Newsom’s “stay at home” order — with a notable exception. The governor says residential construction can continue in California.

Perhaps in response to a letter fired off last night by the Association of General Contractors, a Sacramento-based construction trade group, the governor’s office amended his emergency order to designate housing construction as an “essential business” because of the state’s ongoing housing shortage.

Residential developers reached by phone on Friday said they planned to keep building.

“Obviously our offices are closed and we are working remotely, but from what we know right now our projects will continue,” said Aaron Smolinska, vice president of administration at Thomas Saffron & Associates, whose projects underway include a 98-unit residential project in Venice.

“Based on the latest release construction can go on,” said Neil Shekhter, head of NMS Properties, who has projects in the pipeline in Santa Monica, Westwood and elsewhere.

Shekhter said there’s a chance not every construction worker would show up to work, but at least LA’s many resi projects can move forward.

“People need a place to live and we need to deliver housing,” Shekhter said.

But what about non-housing projects?

Construction companies including L.A. based-Webcor have recently shut down Bay Area projects due to local directives that non-housing or public works projects are not essential.

The governor’s order would appear more permissive, asserted Peter Tateishi, executive director of the Association of General Contractors, and include projects such as hospitals, schools and perhaps even office buildings.

But it is unclear whether the state executive order overrides city and county restrictions, or not. “We have been working all day to nail down that clarity with the governor’s office, and haven’t gotten it,” Tateishi said.

Messages left with the governor’s office Friday were not immediately returned.

The answer will have a significant impact on Los Angeles, as Mayor Eric Garcetti issued an order Thursday night that could curb commercial construction.

Los Angeles construction companies reached Friday including W.E. O’Neil and Webcor stated that they were still reviewing the state and local orders, and did not have announcements yet on company policy going forward.

Also put on the ice is almost the entire business of buying and selling residential real estate.

Aaron Kirman, a real estate agent at Compass, said Newsom’s “stay at home” order “essentially shuts us down completely.”

Kirman and other real estate professionals reached Friday were philosophical about the situation. The coronavirus has already unleashed havoc on some real estate sectors, and people could only speculate on how much worse it will get.

“I’m just sitting at home right now, and grateful to have a home,” Kirman said.

An auspicious beginning of 2020 for L.A.’s top residential brokerages that included record-setting sales has quite literally ground to a halt.

Agents and brokers reached Friday acknowledged their business was non-essential, a sea change from comments just 24 hours earlier in which agents professed deals were being done through private appointments.

Compass, the no. 2 brokerage in Los Angeles by sales volume, told The Real Deal that they are canceling all showings immediately.

The now statewide shutdown had already been taking place in the Bay Area, and the result on the ground there is “the suspension of the entire industry,” said D.J. Grubb, broker for Grubb and Company.

Grubb said it is almost impossible to expect home sales to happen with tours done over online streaming, and that public officials are serious about the crackdown on non-necessary travel. “A worker I have who was posting for-sale signs was pulled over on the freeway, ticketed, and told to go home because what he was doing was non-essential,” the broker said.

Another issue is that even if a home sale were to close, county recorder offices may not be open to record the deal. The California Association of Realtors put out a “coronavirus addendum/amendment this week” referring to the global pandemic as a “Force Majeure” event that allows closings to be postponed, “as a result of unforeseen circumstances related to COVID-19.”

Said Grubb, “I’ve dealt with fires and earthquakes. That’s easy. Those never broke down commerce. This breaks down commerce.”


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