Editor’s note: An urban identity crisis

Stuart Elliott
Stuart Elliott

Here’s a quick rundown of where the country’s top real estate market is at, more than six months into a pandemic that has upended our lives.

The troubling numbers tie into two of several big themes this issue: How our largest cities are undergoing their greatest change in decades and how the full impact of the pandemic might not be showing up in companies’ books as it should.

In New York:

—About 10 percent of Manhattan workers have returned to the office.
—There’s been a roughly 500 percent year-over-year increase in the number of people moving out of the borough.
—The number of rental apartments on the market has tripled from a year ago.
—Manhattan office leasing is down 50 percent, with this year’s total on track to be the lowest since the turn of the century.
—The average revenue per room in the city’s hotel market has tumbled 70 percent.
—The pandemic has shaved $16 billion off projected construction spending in 2020 and 2021.
—The mortgage delinquency rate has tripled from a year ago.
—One bright spot: Industrial leasing is up 70 percent compared to last year.

Based on these numbers, New York and many other big cities are going to have their work cut out for them — particularly when it comes to their commercial districts. As reporters Kathryn Brenzel and Rich Bockmann write in our story “The Metamorphosis of the Metropolis,” there’s “an existential question confronting New York and other alpha cities: Post-pandemic, can their central business districts survive?”

Right now, workforces have been distributed far and wide as the majority of employed Americans work remotely. The key to the future will depend on how cities approach long-term planning and how the office market shakes out after the economic crisis. 

Part of the long-term thinking for New York, according to some experts, should be to create more business hubs outside Manhattan. Along the same lines, an idea emerging in Europe is the notion of a “15-minute” city, where residents should be a short walk or bike ride away from most of their core needs. That includes being close to work, negating the need for a lengthy commute (one of the big hindrances to workers returning to offices today).

Obviously, this would involve immense changes to our cities, but on the other hand, we are going through a time of immense change already.

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Meanwhile, our cover story this month looks at the behemoth landlord Brookfield Property Partners, examining how accurately its financial statements reflect the downturn in the retail and office markets. The questions hinge, perhaps surprisingly, on the fact that Brookfield is a Canadian company and therefore not subject to the same standards as firms based in the U.S.

Despite the outlook for malls plummeting, Brookfield claims that its core retail portfolio declined by less than 2 percent in the first half of the year.

And in Las Vegas — where the unemployment rate is above 15 percent and the Strip shut down for the first time in a half-century — the company actually reported the value of its investments going up since the pandemic hit.

It turns out Brookfield isn’t required to hire outside appraisers to determine the value of its properties — the company itself can decide how they are booked. While Brookfield claims that it uses third-party appraisers to value parts of its portfolio, one forensic accountant told The Real Deal more generally that the shortcomings of the foreign accounting system it uses can be “bullshit” that “does not get exposed enough in Canada.” Oh, Canada.

Elsewhere in the issue, we have a “survival guide” for American mall owners, which looks at some possible solutions to the problems facing shopping centers. One retailer mentioned using more space for voting booths and community meetings, which doesn’t sound that lucrative.

Lastly, for your final election fix, check out our latest coverage on the contentious race between Joe Biden and Donald Trump. It’s hard to believe that by the time our next issue comes out, we’ll know (hopefully) who the country’s president is for the next four years.

Enjoy the issue.