Just over a month ago, as North America was beginning its lockdown, the Europeans were the ones showing us how to stay sane in quarantine through balcony orchestras and viral internet videos. Now we're looking to them for how best to reopen the economy and minimize the number of fits and starts.
This morning Spain recorded its lowest daily death rate from the coronavirus. It is beginning to prepare for a phased relaxation of its lockdown rules. Things will not return to normal overnight. [Financial Times]
Spain allowed construction activity and manufacturing to resume this past week. As a reminder, Spain's strict lockdown started on March 14. [New York Times]
Bookstores are open in Venice, but that's about it. Customers have to enter one at a time, or schedule an appointment. Hotels, restaurants, and cafes remain shuttered. It is believed that at least 1/6th of all Italian restaurants and bars will not survive. Reopening is not happening uniformly across Italy's 20 regions. [Wall Street Journal]
Last week, Denmark became the first country in the Western world to reopen elementary schools. The desks are far apart and teaching outside is being maximized, but some/many are concerned that this is too soon. Are we prioritizing the economy (i.e. free up the parents) over the health of our children? [New York Times]
The Czech Republic currently has one of the lowest number of cases on the continent. But hardware stores and bike shops are some of the only nonessential businesses that are allowed to be open. The Easter weekend saw an over 60% increase in year-over-year sales. Biking is something to do right now. [Wall Street Journal]
Photo by Grant Lemons on Unsplash
I was recently asked about why I'm not writing more about the impact of COVID-19 on the real estate industry and on city building more broadly. The honest answer is that, like everyone else, I've been preoccupied with two other topics: our health and our economy. And as we write this playbook for the very first time and start to think about reopening the global economy, these are the two things we are obviously going to need to balance.
I also don't believe that we're going to see a fundamental reshaping of our cities. Many of the trends that were already underway could get accelerated. But it feels too premature to prognosticate pivotal shifts in the way we are going to live our lives (though they make for good headlines). And, ultimately, I believe wholeheartedly in what Fred Wilson wrote earlier this week: "In person social interaction is the core of being human and I think this pandemic is reminding all of us how vitally important that is."
All this said, it is probably time to talk about what's happening in the real estate / development space.
Much of the real estate industry has been focused on rent collection and on working with all of its various stakeholders so that as many people and companies as possible can make it to the other side of this. Everyone has bills to pay. Tenants have expenses. Landlords have expenses. And I don't think that many people appreciate how interconnected and circular the whole system is. The rents that get paid are, in many instances, being used to fund people's retirements. (i.e. The real estate is owned by pension funds.)
Earlier this week, Slate Office REIT announced that it had collected 97% of April rents and Slate Retail REIT announced that, as of April 14th, it had collected 80% of April rents. These are extraordinary numbers, particularly when you consider that retail and hospitality are two of the hardest hit asset classes right now. Over 60% of Slate Retail REIT's portfolio is made up of essential tenants, such as grocers and pharmacies, which is why this number is so above average for the retail space. This was a deliberate decision made well before COVID-19.
On the development side of things, projects in the approvals phase are still moving along, albeit more slowly. All municipalities have rightly cancelled in-person council meetings and in-person public meetings. But I don't see why these can't shift to an online forum and I hope that we will see that happen sooner rather than later. We are spending time on this. I also see it as an opportunity to reconsider how community engagement is done and how the process can better collect broad-based community feedback. As we all know, public meetings tend to attract one particular demographic.
Pre-construction condo sales and land sales have slowed dramatically. As Charlie Munger mentioned in the Journal this week: "Everybody's just frozen." We are all trying to glean what the future holds. (Charlie and Warren have been remarkably quiet over the last several weeks, but they'll be on the online stage -- on my birthday -- for their annual meeting.) At the same time, we have noticed sentiment start to become more positive over the last week or so and we have sold a number of larger suites at Junction House. In my humble opinion, now is an excellent time to continue making these sorts of decisions if you are in a position to do so.
I will end by saying that we are all trying to find our way during this unprecedented time. Now is not the time for parochial attitudes. We are all in this together. It is our health and our economy. The global economy is far more interconnected than some might think. If any of you know of causes that you believe should be supported right now, I would encourage you to leave those suggestions in the comment section below.
The Moovit Public Transit Index has been tracking the impact of COVID-19 on public transit usage around the world. Not surprisingly, people are using transit a lot less.
Above is a chart from Moovit showing usage from January 15, 2020 to April 12, 2020, for a collection of US cities including San Francisco, Chicago, New York, Philadelphia, Seattle, and others. Early March is when usage started to really fall off, with most of the cities now sitting somewhere around 70-75% below January levels.
For the most part, the cities included in this chart have followed a similar trajectory. But there are a couple of outliers. Philadelphia doesn't seem to have fallen quite as much as other major US cities (-55.7% as of April 12, 2020). I'm not sure why. San Francisco looks to have "corrected" a lot faster. Perhaps because of an easier/quicker shift to working from home? And then there's Seattle.
The first confirmed US case of COVID-19 occurred in the Seattle area on January 21, 2020. Looking at the above chart (and implying causation), that single case appears to have had an immediate impact on transit usage. Over the subsequent three days, ridership dropped to -4%, -8.3% and then to -9.1%. Usage then remained consistently lower relative to all of the other cities in this index.
Was that it? Did Seattleite's behaviors really change that quickly? (And yes, I did have to look up the demonym for the fine people of Seattle.)
Just over a month ago, as North America was beginning its lockdown, the Europeans were the ones showing us how to stay sane in quarantine through balcony orchestras and viral internet videos. Now we're looking to them for how best to reopen the economy and minimize the number of fits and starts.
This morning Spain recorded its lowest daily death rate from the coronavirus. It is beginning to prepare for a phased relaxation of its lockdown rules. Things will not return to normal overnight. [Financial Times]
Spain allowed construction activity and manufacturing to resume this past week. As a reminder, Spain's strict lockdown started on March 14. [New York Times]
Bookstores are open in Venice, but that's about it. Customers have to enter one at a time, or schedule an appointment. Hotels, restaurants, and cafes remain shuttered. It is believed that at least 1/6th of all Italian restaurants and bars will not survive. Reopening is not happening uniformly across Italy's 20 regions. [Wall Street Journal]
Last week, Denmark became the first country in the Western world to reopen elementary schools. The desks are far apart and teaching outside is being maximized, but some/many are concerned that this is too soon. Are we prioritizing the economy (i.e. free up the parents) over the health of our children? [New York Times]
The Czech Republic currently has one of the lowest number of cases on the continent. But hardware stores and bike shops are some of the only nonessential businesses that are allowed to be open. The Easter weekend saw an over 60% increase in year-over-year sales. Biking is something to do right now. [Wall Street Journal]
Photo by Grant Lemons on Unsplash
I was recently asked about why I'm not writing more about the impact of COVID-19 on the real estate industry and on city building more broadly. The honest answer is that, like everyone else, I've been preoccupied with two other topics: our health and our economy. And as we write this playbook for the very first time and start to think about reopening the global economy, these are the two things we are obviously going to need to balance.
I also don't believe that we're going to see a fundamental reshaping of our cities. Many of the trends that were already underway could get accelerated. But it feels too premature to prognosticate pivotal shifts in the way we are going to live our lives (though they make for good headlines). And, ultimately, I believe wholeheartedly in what Fred Wilson wrote earlier this week: "In person social interaction is the core of being human and I think this pandemic is reminding all of us how vitally important that is."
All this said, it is probably time to talk about what's happening in the real estate / development space.
Much of the real estate industry has been focused on rent collection and on working with all of its various stakeholders so that as many people and companies as possible can make it to the other side of this. Everyone has bills to pay. Tenants have expenses. Landlords have expenses. And I don't think that many people appreciate how interconnected and circular the whole system is. The rents that get paid are, in many instances, being used to fund people's retirements. (i.e. The real estate is owned by pension funds.)
Earlier this week, Slate Office REIT announced that it had collected 97% of April rents and Slate Retail REIT announced that, as of April 14th, it had collected 80% of April rents. These are extraordinary numbers, particularly when you consider that retail and hospitality are two of the hardest hit asset classes right now. Over 60% of Slate Retail REIT's portfolio is made up of essential tenants, such as grocers and pharmacies, which is why this number is so above average for the retail space. This was a deliberate decision made well before COVID-19.
On the development side of things, projects in the approvals phase are still moving along, albeit more slowly. All municipalities have rightly cancelled in-person council meetings and in-person public meetings. But I don't see why these can't shift to an online forum and I hope that we will see that happen sooner rather than later. We are spending time on this. I also see it as an opportunity to reconsider how community engagement is done and how the process can better collect broad-based community feedback. As we all know, public meetings tend to attract one particular demographic.
Pre-construction condo sales and land sales have slowed dramatically. As Charlie Munger mentioned in the Journal this week: "Everybody's just frozen." We are all trying to glean what the future holds. (Charlie and Warren have been remarkably quiet over the last several weeks, but they'll be on the online stage -- on my birthday -- for their annual meeting.) At the same time, we have noticed sentiment start to become more positive over the last week or so and we have sold a number of larger suites at Junction House. In my humble opinion, now is an excellent time to continue making these sorts of decisions if you are in a position to do so.
I will end by saying that we are all trying to find our way during this unprecedented time. Now is not the time for parochial attitudes. We are all in this together. It is our health and our economy. The global economy is far more interconnected than some might think. If any of you know of causes that you believe should be supported right now, I would encourage you to leave those suggestions in the comment section below.
The Moovit Public Transit Index has been tracking the impact of COVID-19 on public transit usage around the world. Not surprisingly, people are using transit a lot less.
Above is a chart from Moovit showing usage from January 15, 2020 to April 12, 2020, for a collection of US cities including San Francisco, Chicago, New York, Philadelphia, Seattle, and others. Early March is when usage started to really fall off, with most of the cities now sitting somewhere around 70-75% below January levels.
For the most part, the cities included in this chart have followed a similar trajectory. But there are a couple of outliers. Philadelphia doesn't seem to have fallen quite as much as other major US cities (-55.7% as of April 12, 2020). I'm not sure why. San Francisco looks to have "corrected" a lot faster. Perhaps because of an easier/quicker shift to working from home? And then there's Seattle.
The first confirmed US case of COVID-19 occurred in the Seattle area on January 21, 2020. Looking at the above chart (and implying causation), that single case appears to have had an immediate impact on transit usage. Over the subsequent three days, ridership dropped to -4%, -8.3% and then to -9.1%. Usage then remained consistently lower relative to all of the other cities in this index.
Was that it? Did Seattleite's behaviors really change that quickly? (And yes, I did have to look up the demonym for the fine people of Seattle.)
The UK is not yet considering a relaxation of its lockdown. As of Sunday, the situation remains "deeply worrying." The UK currently has the 5th highest national death toll. [Globe and Mail]
On April 13, Emmanuel Macron announced that France would begin a phased reopening of its economy -- schools and some businesses -- starting on May 11. This is a unique approach. He gave a firm date, well into the future. What if this doesn't make sense when the time comes? Clearly the government felt that the psychological benefits of a firm date outweighed the potential risks. Minimize uncertainty during an uncertain time. [Le Monde]
Lots of discussion around the porosity of borders. Logically, there's a view that unless there's a common strategy, it's better to keep borders closed. But what are the economic implications of doing that? [New York Times]
The UK is not yet considering a relaxation of its lockdown. As of Sunday, the situation remains "deeply worrying." The UK currently has the 5th highest national death toll. [Globe and Mail]
On April 13, Emmanuel Macron announced that France would begin a phased reopening of its economy -- schools and some businesses -- starting on May 11. This is a unique approach. He gave a firm date, well into the future. What if this doesn't make sense when the time comes? Clearly the government felt that the psychological benefits of a firm date outweighed the potential risks. Minimize uncertainty during an uncertain time. [Le Monde]
Lots of discussion around the porosity of borders. Logically, there's a view that unless there's a common strategy, it's better to keep borders closed. But what are the economic implications of doing that? [New York Times]
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