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11 Must Reads for the CRE Industry Today (May 6, 2020)

The New York Times looks at how coronavirus has threatened the long-term push for denser housing. Forty-seven percent of Vornado Realty Trust’s retail tenants did not pay rent for the month of April, reports Crain’s New York Business. These are among today’s must reads from around the commercial real estate industry.

  1. Coronavirus Threatens Push for Denser Housing “Transportation and denser housing have been the two focal points of urban residential development for the last decade, as cities try to combat a severe shortage of affordable housing. In areas where car commute times continue to climb, and freeways are at capacity, building denser communities along transit lines is seen as a panacea.” (The New York Times)
  2. Mall Owner That Spent Big to Modernize Faces Bill as Stores Sit Closed “A mall owner’s struggles to pay down debt show that investments to contend with online shopping risk leaving the industry more vulnerable during the pandemic recovery. Pyramid Management Cos. of Syracuse, N.Y., which owns and operates 14 properties in New York and Massachusetts, said it has invested hundreds of millions of dollars in recent years to make its retail centers about more than shopping. The privately held firm installed an 85-foot-tall indoor rope course in one mall and a 70-foot one in another.” (Wall Street Journal, subscription required)
  3. Gold’s Gym Files for Bankruptcy After Blow from Coronavirus Pandemic “Gold's Gym has filed for Chapter 11 bankruptcy protection, the company announced Monday. Its 700 gyms worldwide will stay open as it looks to restructure during the coronavirus pandemic that has virtually shutdown the entire U.S. economy. Last month, Gold's Gym permanently closed about 30 company-owned gyms during the COVID-19 outbreak. The company at the time said the decision was made ‘to maintain the strength and growth of the potential of the brand as well as ensure the continued viability of the company for decades to come.’” (CBS News)
  4. $400M Mall Brawl: Simon Property Group, Macerich Sue City of Carson “Plans for a $400 million, 566,000-square-foot outlet mall in the city of Carson have fallen apart, with project developers Simon Property Group and Macerich suing the city for negligence and breach of contract. A lawsuit filed April 30 by Cam-Carson limited liability company, a joint venture of Simon Property Group and Macerich, said the city of Carson broke its pledge to spend $27 million in order to clean up the site, a former toxic landfill.” (The Real Deal)
  5. The Layoffs at Airbnb Cast a Dark Shadow Over Silicon Valley “Brian Chesky, the company’s founder and CEO, told staff on Tuesday that the company’s revenue would be halved and that it would terminate about 1,900 of its 7,500 staff members — one of the largest layoffs in total that Silicon Valley has seen since the Covid-19 pandemic struck. Airbnb’s decision serves as a stark reminder of the coronavirus’s toll, which has hamstrung the global economy, forcing almost all startups to consider cuts and particularly wrecking the travel industry.” (Vox)
  6. Mixed-Use Owners “Squeezed” by COVID-19 Fallout “Real estate assets across nearly every sector have been impacted on some level by the coronavirus pandemic. But with mixed-use properties, the hit is coming from more than one angle, causing more headaches and hardship for owners. ‘A lot of owners are getting squeezed from a variety of directions,’ said Deborah Riegel, a real estate attorney at law firm Rosenberg & Estis in New York City, pointing to residential buildings with ground-floor retail space in particular.” (Commercial Property Executive)
  7. Silicon Valley Real Estate at a ‘Turning Point’ as Construction Resumes “The worldwide coronavirus pandemic has been felt in all industries, but one of the most stark representations of the virus’ impact is in the empty office buildings and rolling tech campuses in busy, work-obsessed Silicon Valley. Ripple effects of staying at home appear in small, nuanced ways in a new report, released by Joint Venture Silicon Valley and commercial real estate brokerage JLL, which analyzes real estate data from the first quarter. That data capture the effects of only about two weeks of the region’s shelter-in-place order, and show an economically strong Silicon Valley.” (San Jose Spotlight)
  8. Half of Retail Tenants Stiff Vornado, the City’s Largest Commercial Landlord “Nearly half of the Vornado Realty Trust’s retail tenants—47%—did not make rent payments for the month of April, according to the company's Monday earnings report. The silver lining for the city’s largest commercial landlord, however, was that 90% of office rents came in for the same month.” (Crain’s New York Business, subscription required)
  9. Nordstrom Is Preparing to Reopen its Stores. Here’s What the Retailer Is Changing “Plexiglass screens at cash registers, fewer fitting rooms and no cash allowed. Nordstrom is preparing to reopen some of its department stores — following the lead of Macy’s — offering a glimpse at how shopping at the mall will be different coming out of the coronavirus pandemic. ‘Our stores won’t open all at once,’ President Pete Nordstrom and Chief Executive Erik Nordstrom said in a memo posted on the company’s website Monday evening. ‘We’re going to take a phased approach.’” (CNBC)
  10. Walmart to Resume Standard Hours for Most Stores Nationwide “Walgreens Boots Alliance Inc. said starting Tuesday, most of its stores nationwide will resume standard operating hours. The drug store chain said some stores, such as those located in tourist regions, downtown city centers or markets with government-mandated curfews, will continue to operate under adjusted hours implemented in March. The company's California stores will resume standard operating hours beginning May 18.” (MarketWatch)
  11. Smaller Footprints and a Greenhouse on the Roof: Grocery Chains Adapt to Pandemic “ULI charted a 30% decline in apparel and furnishing tenants since the Great Recession, which has been balanced out with by a 30% increase in grocery store, fast-food and supermarket tenants during the same period.  Now, those new grocery stores are going from anchor store positions at shopping centers to secondary and even tertiary positions. Sprouts currently operates over 340 stores in 22 states in the U.S. But the pandemic has changed the inside of many stores, with most things shoppers might have shared, like deli counters or salad bars, being stripped out.” (Bisnow)
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