Local directives of Shelter-In-Place, Social Distancing and the mass closure of a vast array of businesses (restaurants, bars, malls, theatres, etc.) has resulted in 16 million more Americans filing for unemployment benefits over the past three weeks. Many analysts forecast that April’s unemployment rate will spike to nearly 15 percent, up from March’s rate of 4.4 percent.
As such, the inevitable pain is rapidly being felt in the real estate industry. Tenants are missing rent payments, property owners are missing mortgage payments, homebuyers are sitting on the fence and some real estate companies are starting to assemble teams to prepare for an upcoming recovery once the global contagion gets under control.
Thirty One Percent of Residential Tenants Skipped Rent in April
According to according to data from 13.4 million units published by the National Multifamily Housing Council, only 69 percent of renters paid their rent by April 5th, down from 81 percent who paid in March.
Mortgage Forbearance Requests Skyrocket
Meanwhile, according to a report from the Mortgage Bankers Association, forbearance requests jumped 1,270% between March 2 and March 16 and another 1,896% between March 16 and March 30. In total, 2.66% of all mortgage loans are now in forbearance—a type of relief program that allows borrowers to pause payments for an established period of time.
Jeff Taylor, whose Digital Risk platform powers some of the nation’s biggest loan servicers, says the uptick in forbearance requests has been “staggering” in recent weeks.
“Each of the top five servicers has already received more forbearance requests in the last month than in the entire financial crisis of 2008,” says Taylor, managing partner at Digital Risk. “Servicers are up over 50 times in forbearance requests in one month compared to an entire normal year like 2019.”
Mortgage Servicers Call for Help
The coronavirus relief bill, signed by President Trump, seeks to limit the economic damage from the coronavirus pandemic. It includes a mandate that all borrowers with government-backed mortgages (nearly 62% of all first lien mortgages) be allowed to delay at least 90 days of monthly payments and up to a year’s worth.
According to CNBC, “mortgage servicers, who collect borrowers’ monthly payments, are still required to pay the bondholders on those loans, whether borrowers pay or not”.
Mortgage servicers are calling on regulators to help them make those payments.
WeWork Misses Rent Payments
Beleaguered co-working startup WeWork hasn’t paid April rent for some locations and is approaching landlords regarding rent abatements, revenue-sharing agreements and other lease amendments as it seeks to trim liabilities, according to Fox Business.
The New York-based co-working giant is in discussions with its biggest landlords globally as it aims to slash as much as 30% from its massive load of rent liabilities, which stood at $47 billion as of June 30. The New York-based company recently hired brokerage firms JLL and Newmark Knight Frank to negotiate rent relief or convert lease deals into profit-sharing agreements in a bid to drive down its fixed monthly expenses.
Cushman & Wakefield Prepares Coronavirus Recovery Plan
Cushman & Wakefield announced that it has formed the Recovery Readiness Task Force (RRTF) to lead the development of best practices, products and partnerships to prepare clients for post-COVID-19 recovery and the eventual return to the workplace, reported Seeking Alpha.
“The virus will dictate when we can eventually return to places of work and commerce, but the time to prepare is now,” said John Forrester, President of Cushman & Wakefield and Executive Chair of the Recovery Readiness Task Force. “We’re mobilizing our top thought leaders and experts, drawing on their experience in areas like workplace innovation and strategy, design and build, facilities management, commercial cleaning protocols, data and technology and research.”
Shortly, the RRTF will be releasing a toolkit with step-by-step protocols for tenants and landlords to use as they begin planning the transition back to the workplace. This effort will build on best practices from Cushman & Wakefield’s experience in China, where the firm is already moving 10,000 companies and nearly a million workers back into more than 1,000 buildings through a joint venture with Vanke Service.
“We’re applying our learnings from Asia so our clients will be well-educated and prepared for the eventual return to the workplace,” Forrester added.