No one likes to sound like a broken record, but things aren’t getting any better for real estate, regardless of the sector.
SL Green can certainly attest to this, which has seen its occupancy in its 25 buildings in the borough drop to just over 90 percent in the first quarter, according to Crain’s. That’s a drop of 280 basis points year-over-year, or nearly twice the rate from the first quarter in 2021 to the first quarter in 2022.
Still, SLG representatives remain hopeful about the company’s prospects going forward, with a spokesperson saying the expected occupancy rate should be over 92 percent by the end of the year.
Elsewhere, New York-based Fairstead laid off 10 percent of its 700-employee workforce within the past few months, outsourcing much of that work to an India-based subsidiary.
It’s not just New York that is feeling the commercial pinch.
Office sales in the Dallas-Forth Worth area are down 80 percent — $227 million from $1.1 billion — from January to February year over year, the Dallas Morning News reported, citing data from Yardi Systems’ CommercialEdge.
The silver lining, if there is one, is that North Texas still ranks ninth in the country for office sales so far.
Forget any optimism for Oakland’s office market, where landlords have started to lower rents after holding steady throughout the pandemic. That could lead to defaults as current loans mature and refinancing deals with current interest rates jack up debt payments.
Oakland’s business district saw asking rents for Class A office space drop from $63.60 per square foot in the fourth quarter to $60.12 in the first quarter, according to a recent market report by CBRE.
And coworking giant WeWork received a non-compliance notice from the New York Stock Exchange, Reuters reported, after its stock closed below $1 on average over a 30-day trading period. The company has six months to regain compliance before being delisted from the exchange.
Resi writhing
Commercial real estate isn’t the only market to feel the pain. Cracks are showing in the residential space, too.
Residential sales in the once-white hot South Florida market fell again in the first quarter, as inventory rose, yet was still below pre-pandemic levels.
The only area where sales increased was Manalapan, Hypoluxo Island and Ocean Ridge, according to Douglas Elliman’s first quarter reports. That’s likely because the market is very small, so a bump of just a few deals can make the difference. Single-family home sales rose 36 percent annually to 15 closings in the first quarter.
Aside from Manalapan, Hypoluxo Island and Ocean Ridge in Palm Beach County, sales fell year-over-year across the South Florida cities, according to a report by Elliman. Jonathan Miller, who authors the quarterly reports, said the number of deals has also fallen below pre-pandemic levels.
“It’s not just about mortgage rates being more than double what they were a year ago. Inventory is chronically low,” he said, adding that inventory is 30 percent to 60 percent below where it was in the same period of 2020 and before.
In Los Angeles, luxury agents are sweating the potential impact of a strike by members of the Writers Guild of America.
Real estate agent Mason Canter recalled its last strike in 2007-2008, which lasted 100 days, and was estimated to cost the Los Angeles economy more than $2 billion, according to media reports.
“A strong buying force went away,” Canter said of the strike that immediately preceded The Great Recession. “It caused a lot of people to evaluate whether they could spend.”
Dead before arrival
And, finally, it’s a rough go for policy makers, as New York Gov. Kathy Hochul’s housing agenda appears to be dead or, if you’re Miracle Max, mostly dead.
An extension for projects seeking the crucial property tax break 421a is not expected to be included in the state budget, according to sources with knowledge of the negotiations between the governor and legislature. Neither are changes that would allow more conversions of offices into apartments, or to raise the residential floor area ratio cap in New York City.
Hochul had pushed to wrap all of those measures into the budget bill — a recognition that passing them later in the legislative session would be even harder. But now the budget is nearly three weeks late, and consensus among legislators on her plan to add 800,000 homes statewide over the next decade has been elusive.
It might take a miracle to pull a consensus together.
Hochul’s housing mandates already bit the dust. Now, the rest of her housing agenda appears to be on life support, if not dead.
An extension for projects seeking the crucial property tax break 421a is not expected to be included in the state budget, according to sources with knowledge of the negotiations between the governor and legislature. Neither are changes that would allow more conversions of offices into apartments, or to raise the residential floor area ratio cap in New York City.
Hochul had pushed to wrap all of those measures into the budget bill — a recognition that passing them later in the legislative session would be even harder. But now the budget is nearly three weeks late, and consensus among legislators on her plan to add 800,000 homes statewide over the next decade has been elusive.
Unfortunately for Hochul, and everyone else in real estate, there’s no map to navigate the wildly uncertain road ahead.