Nareit's REIT Report Podcast

Nareit Senior Economist Calvin Schnure said REITs are facing a “mixed picture” as the forces of economic recovery are being tempered by uncertainty regarding the ongoing risks from COVID-19.In the June 22 edition of the REIT Report, Schnure noted that the recent divergence between the course of the pandemic and the pace of economic activity strengthened over the past week. While REITs and the broader equity markets reacted positively to surprisingly strong May retail sales numbers, that optimism subsided later in the week on news of a surge in new COVID-19 cases and what that means for the prospects of economic reopening.

Gina Szymanski, portfolio manager and director at AEW Capital Management, an affiliate of Natixis Investment Managers, joined the latest edition of the Nareit REIT Report podcast.Szymanski discussed some of the differences between the current COVID-19 crisis and the global financial crisis. She pointed to the size and pace of fiscal and monetary stimulus as “the biggest difference by far.”“During the last crisis the Fed was still learning how to be creative. This time around they are very aware of the playbook," Szymanski said.

In the latest edition of the REIT Report, Nareit Senior Economist Calvin Schnure said investors will be watching this week to see if economic indicators point to an uptrend similar to what was seen in the recently-released May unemployment report.May retail sales numbers released this week will show whether or not spending has bottomed, Schnure said. The Federal Reserve, meanwhile, will report industrial production this week, while housing starts will also be released.“Over the next several days, we’ll get a lot better idea of whether the whole economy is starting to turn towards recovery the way we saw in the job market,” Schnure said.

In the latest edition of the Nareit REIT Report, Darin Buelow, global location strategy leader at Deloitte, looked at the specific challenges that financial institutions face in returning to the workplace after an extended absence resulting from COVID-19.According to Deloitte, financial institutions account for more than 15% of total office leasing activity.Buelow noted that many financial service firms are located in downtown high-rise environments where employees have to use public transportation and deal with elevator access. COVID-19 is hitting these companies “very profoundly,” he noted.

Nareit Senior Economist Calvin Schnure discussed some of the main themes from Nareit’s REITweek: Virtual Investor Conference and the May jobs report in the June 8 edition of the Nareit REIT Report podcast.Schnure characterized the overall mood at REITweek as “cautiously optimistic.”“Obviously we’re still in unchartered waters and there’s a lot of concern about unforeseen risks in the period ahead,” Schnure noted. While economic activity is beginning to resume, few expect it to be without glitches, he added.At the same time, property sectors are seeing a wide range of impacts from the crisis. In the retail sector, for example, the reopening of the economy is expected to help rent collection but going forward many tenants are still going to have a low level of revenue, “so we’re not out of the woods yet on that front,” Schnure said.

The latest edition of the Nareit REIT Report podcast looked at employment trends in the commercial real estate industry with Marc Torrey, vice president and global sales director at SelectLeaders, a career resources platform for real estate professionals.Torrey explained that the landscape for commercial real estate hiring heading into the coronavirus crisis reflected a typical trend seen in an election year: a slow down on the transaction hiring side and a pick-up on the operations and asset management side. “We were already seeing that, and it went into overdrive with the start of the coronavirus,” he said.While commercial real estate hiring slowed down considerably in April, it picked back up in May, according to Torrey, especially for full-service real estate firms. “We have seen it coming back in May and I think we’re going to see a lot of hiring happening over the course of the next few months and even (for) years to come as a result of everything that’s transpired,” he said.

Nareit’s T-Tracker, a comprehensive summary of REIT earnings and operating performance, showed an overall picture of weak earnings in the first quarter, with about half of the 9% decline in funds from operations (FFO) reflecting the lodging and hotels sector.Speaking May 26 on the Nareit REIT Report podcast, Nareit Senior Economist Calvin Schnure noted that regional malls also had a decline in earnings and most other property sectors had modest declines. Industrial REITs, meanwhile, had a 21.7% increase in FFO, and single family home REITs saw a 7% FFO increase.Most of the first quarter predated the COVID-19 crisis. As a result, second quarter T-Tracker results are likely to be “quite a bit weaker,” Schnure said.

Commercial real estate firms are beginning to implement lessons learned from the COVID-19 pandemic and create targeted measures to emerge stronger in the medium-term, according to Jim Berry, U.S. real estate leader at Deloitte & Touche LLP.Speaking on the Nareit REIT Report podcast, Berry noted that the industry has moved from an initial ‘respond’ phase into a ‘recover’ phase, with many commercial real estate executives now focused on issues such as preparing for re-entry to physical spaces and promoting employee and tenant wellbeing. Executives are also looking at what worked well in the early stages of the crisis and what needs to be improved upon, he said.

The latest retail sales data point to a continued role for brick and mortar retail once the coronavirus crisis passes, according to Nareit Senior Economist Calvin Schnure.Speaking May 18 on the Nareit REIT Report podcast, Schnure noted that the more than 8% rise in non-store retail sales in April, which includes e-commerce, was unable to offset the overall decline of 16.4%.“Online commerce is still no substitute for a lot of the shopping that people do. So, even after this crisis passes, this tells us there’s still a strong role for brick and mortar retail sales,” Schnure said.

Hudson Pacific Properties, Inc. (NYSE: HPP) is preparing to welcome tenants back into its buildings by implementing new standard operating procedures across its portfolio, touching on everything from enhanced cleaning to increased signage and physical distancing policies.Speaking on the Nareit REIT Report podcast, Natalie Teear, vice president of sustainability and social impact at Hudson Pacific, said the REIT is rolling out a “four-C’s” approach that encompasses communication, confidence, convenience, and cooperation. Hudson Pacific is also launching a mobile app at all of its multi-tenant properties in order to share the most up to date information with tenants on a real-time basis.