Real-Estate Investor Run on Signature Bank Helped Fuel Its Demise
According to building owners and state regulators, a rush by New York City real estate investors to yank money out of Signature Bank last week played a significant role in the bank’s collapse.
The withdrawals gained momentum as talk circulated about the exposure Signature had to cryptocurrency firms and that its fate might follow the same path as Silicon Valley Bank, which suffered a run on the bank last week before collapsing and forcing the government to step in.
Analysis: Why Silicon Valley Bank and Signature Bank failed so fast
Silicon Valley Bank and Signature Bank failed with enormous speed so quickly that they could be textbook cases of classic bank runs, in which too many depositors simultaneously withdraw their funds from a bank. The failures at SVB and Signature were two of the three biggest in U.S. banking history following the collapse of Washington Mutual in 2008.
Office Owners Already Reeling From Remote Work Now Face Recession Risk in 2023
Owners of office buildings stumbled through 2022 when their holdings underperformed most every other type of commercial real estate. Things look poised to get worse in 2023.
Landlords have been longing for employees to head back to office buildings in greater numbers. But the national return rate has crept up slowly. For the past three months, it has plateaued at about half of what it was before the pandemic.
Now, a possible recession is making the outlook for 2023 even gloomier. New business searches for new office space, after rebounding in 2021, fell in 2022 to 44% of what they were in 2018 and 2019, according to VTS, a firm that operates a data platform that tracks tenant demand.
Pension Funds Are Selling Their Office Buildings
Major U.S. and Canadian pension funds are cutting back investments in office buildings, betting that prices will likely fall as the five-day office workweek becomes a thing of the past. This shift is part of a broader transition away from traditional real estate holdings in offices and shopping centers as the Covid-19 pandemic has accelerated the rise of e-commerce and remote work.
Office Index Plummeting as Recession Fears Grow
It’s already been a tough year for owners in the office market. An index, tracking shares of publicly traded office owners, has dropped 29 percent in the first two quarters of the year, the Wall Street Journal reported. That outpaced the 21 percent fall in the S&P 500 stock index.
New York City’s office market is improving every month, but what it will look like a year from now is anyone’s guess, Vornado Realty Trust’s management said Tuesday.
Vornado’s shares rose roughly 2 percent after the company reported first-quarter earnings and revenue that beat Wall Street consensus expectations. Funds from operations per share, a key REIT earnings metric, increased more than 20 percent year over year to $0.79 on an as-adjusted basis, beating the consensus estimate by 3 cents. Net operating income ticked up 3.1 percent.
WeWork’s Losses Narrow but Still Huge
WeWork’s quarterly losses narrowed throughout 2021, but the year’s total was a sobering reminder of the flex office company’s struggle to regain its former glory.
WeWork’s stock tumbled around 3 percent Friday, then rebounded, after the company reported a $4.4 billion net loss for the year. That’s up from losses of $3.1 billion in 2020 and $3.3 billion in 2019.
Manhattan investment sales top pre-pandemic levels in Q4 comeback
The city may be entering its third year under the looming shadow of Covid, but investment sales have snapped back to pre-pandemic levels.
Manhattan recorded 100 investment transactions totaling just over $6.2 billion in the fourth quarter of 2021, according to a report by Avison Young, the highest dollar volume and most deals recorded in a single quarter since 2018.
Flight to Quality Drove Gains in Manhattan Office Market
The Manhattan office market’s gains in the wake of the pandemic appear to be centered on a continued flight to quality.
CBRE Investment Management recently agreed to buy a portfolio of logistics properties from Ross Perot Jr.’s Hillwood Investment Properties, according to the Wall Street Journal. The properties involved in the deal are valued at $4.9 billion.