The new office normal: 2021 update

The new office normal: 2021 update
by Brad Cartier, posted in Newsletter

It’s been a difficult year for office landlords. And the trend to remote work has permanently altered this sector as more and more employers are downsizing and cancelling leases. Last week alone, Target, Minneapolis’ largest office employer, announced it will leave its headquarters space in the City Center building. This reduces its downtown office footprint by a full.

In San Francisco, Salesforce reportedly cancelled its plans for a 325,000 square feet downtown office signed in 2018. According to Business Insider,

“The decision follows Salesforce’s announcement last month that it would adopt three new ways of working going forward. The new guidelines, which Salesforce is calling “Work From Anywhere,” offer employees options for how they’ll work in the future: flex, fully remote, and office-based.”

In their Q4 2020 summary, CBRE reports that vacancy rates rose by 90 basis points in Q4, in addition to the 100 basis point jump in Q3 2020.

CBRE Office Supply and Demand Q4 2020

Source: CBRE

Ryan Ori of the Chicago Tribune reports on the CBRE data showing that 2020 ended with 15.5% of downtown Chicago office space unleased, up from 12.8% in 2019. And, things may get worse for the windy city. “If unused and under-construction space is slower to be gobbled up, vacancy could climb all the way to 20.3%, according to CBRE…Those projections don’t include a record 5.5 million square feet available for sublease in the downtown office market.”

For more on the coming hybrid workforce and the future of remote work, check out Kathryn Vasel of CNN Business’s article titled, The pandemic forced a massive remote-work experiment. Now comes the hard part.

Roofstock + Stessa = 💗

Stessa and Roofstock joined forces two weeks ago, and we couldn’t be happier with the reception to-date.

Mark Calvey of the San Francisco Business Times (subscription required) reports that the Stessa deal “turns Roofstock from a marketplace into more of a platform, deepening client relationships by expanding from the transactional focus of selling investors single-family rentals to having an ongoing relationship with Roofstock clients using Stessa to build and manage their real estate investment businesses. Currently, Stessa users track more than 170,000 individual properties worth more than $45 billion.”

Calvey quotes Roofstock CEO Gary Beasley as noting that the partnership “allows us to create more connectivity with owners throughout the country, and allows us to offer various products and services to existing owners of homes around the country.”

Beasley also said he first spoke to Stessa in 2017, when Roofstock looked at buying them, but ultimately lost out to JLL.

Candyd Mendoza of Mortgage Professional America (MPA) comments more broadly on the implications for JLL, which can now “extend its services in the residential sector. The companies also formed a commercial agreement in which Roofstock will serve JLL’s clients looking to invest in US housing.”

Jeff Piltch of The Motley Fool reports on the implications of this transaction given the red-hot single-family home market. “The single-family residential market has been hot to say the least. Earlier this year, we saw powerhouse Blackstone (NYSE: BX) signal that it was getting back into the single-family game when it announced a $1.6 billion acquisition of home design firm Logic Group Holdings. And now another real estate dynamo, JLL, is betting big on the future of single-family.”

Federal rent assistance

As noted above, the stimulus package has been approved, and there are billions of dollars flowing to the states to implement their versions of rent relief. What this means for landlords is that funds are currently, and will soon, be available for themselves and their tenants to help off-set back rent and utility bills. It’s important for landlords to understand what’s available.

We’ve put together this short guide to help, but there’s also some informative news coverage to report. California is already accepting applications for rent relief, whereas New York is experiencing some legislative gridlock.

Annie Nova of CNBC makes some interesting points about the availability of rent relief:

  • “It will take time for the federal government to disburse all the funds to states, and for each state to set up programs for people to apply to.”
  • “At least one member in your household has to be eligible for unemployment benefits or attest in writing that they’ve lost income.”
  • “You will also need to demonstrate a risk of homelessness, which may include a past due rent or utility notice.”
  • “In addition, your income level for 2020 can’t exceed 80% of your area’s median income, though states have been directed to prioritize applicants who fall at 50% or lower.”
  • “Not all states have set up their rental assistance program yet, but all states should eventually have one.”

The National Low Income Housing Coalition (NLIHC) is a one-stop-shop for national-level resources related to rent relief. They maintain a free database of all programs available that can be useful for landlords who may be eligible for some funding, or can provide their tenants with relevant rent relief information.

NLIHC also provides a map and table of all the various state and city-level programs that could offer aid for renters and landlords facing back rent problems.