The last week of June marks the time when investors lost hope for a V-shaped economic recovery as confirmed cases of COVID-19 increase exponentially in Texas, Florida and California, and the region of three States has imposed quarantine restrictions on travelers. Reopening in some of these states has also been delayed, with retailers closing their brick and mortar stores for the second time.
That being said – the story of the V-shaped recovery imploding – as many on Wall Street bought stocks indiscriminately (some used Scrabble letters to buy) as their belief in the impression of Federal Reserve money would pull the economy out of one of the worst downturns since the 1930s.
Although the economy has never been raised in a V-shape, the stock market has reached new heights as unwavering financial speculation has led an army of Robinhood daytraders to buy bankrupt businesses.
The euphoric period is probably behind us, not least because the Fed's balance sheet has shrunk in recent weeks and cases of viruses across the country are skyrocketing – we are now turning our attention to the crisis of commercial real estate.
During euphoric times, like what has happened in the past few months in the financial markets, bad news is usually overwhelmed with happy stories (sometimes from Larry Kudlow) – but as sentiment changes – we must not lose sight of the instabilities which can ruin the financial situation. system.
Bloomberg cites new report via real estate research company Savills, which details how Manhattan's commercial real estate industry could head for a prolonged downturn if there is no recovery in V in the economy.
The report says that Manhattan office rents are expected to hit their lowest level since 2012, that is, if the economy is not experiencing a rapid recovery. This means that the demand for rents could drop 26% to around $ 62.47 per square foot, the real estate services company said.
A quick recovery or not – the trend in America for business is to work from home – companies have found ways to implement remote access for employees – and this trend will only accelerate .
That being said, the office market in New York is on the verge of a serious crisis – with years of recovery.
"Many assume that when the home support measures are lifted, there will always be fears of Covid-19 that will continue to materially influence behavior and the economy," said Savills. "These fears are likely to persist until a vaccine or antibody therapy is developed and widely available, which experts currently estimate is at least 12 months away."
It's not just the office market that's struggling – we noticed this week that a third of the city's hotels could go bankrupt.
The cracks in commercial real estate have already appeared, in early June there was a massive jump in CMBS delinquencies, suggesting that the bust is just beginning.
For clarity on recovery times – the latest UCLA Anderson Forecast report suggests 2023.