How Will Urban Decline Affect Real Estate?

Published on
September 2nd, 2020
Duration
45 minutes

George Goncalves: Why the Fed Wants to Avoid Yield Curve Control


How Will Urban Decline Affect Real Estate?

The Expert View ·
Featuring Nick Halaris

Published on: September 2nd, 2020 • Duration: 45 minutes

Nick Halaris, president of Metros Capital, returns to Real Vision for an update on the conversation on real estate he shared in May 2020. He breaks down why real estate as an overall asset class has had a bifurcated and, in some ways, surprising response to the COVID-19 pandemic. He explains why the different sectors of retail, office space, hotels, and housing had distinct reactions to the pandemic based on geography, macroeconomic trends, and demographics. Finally, he shares his thoughts on the "death of cities" narrative that has become a major point of debate in media. He argues that the narrative from both sides is exaggerated and lacks nuance as big real estate investors have placed large bets on a rebound in urban living, and smaller urban areas are benefiting from the possibly temporary exodus from megacities like New York and Los Angeles. Filmed August 31, 2020.

Comments

Transcript

  • KP
    Kaushal P.
    5 September 2020 @ 15:54
    Good discussion. I think the trend won’t be city->suburb but big city to secondary city. The big game changers are work from home and taxes which will only go against cities like NY and CHI for a while. As a professional in my mid 30s growing up in the NY area anecdotally 30/50 of my friends, family, cousins in the 30s and 40s have all moved to places like Dallas, Houston, Austin, Nashville etc.
    • JC
      Jason C.
      11 September 2020 @ 22:41
      If this is the trend (which I agree), and this is going to be accelerated due to WFH, then I think the secondary cities that will benefit the most aren't going to be the ones like Dallas/Houston where there is massive sprawl, lots of concrete, lackluster culture and sucky weather, but cities that have more exposure to nature, culture, or nice weather. So cities like Austin, Nashville, Colorado Springs, etc. WFH means you can live in the city you like. No one lives in Houston because they like it.
  • DT
    David T.
    5 September 2020 @ 23:10
    One more reason why people are moving out of big cities is that, the companies are moving out to smaller urban areas and cities. So, jobs are moving out too.
  • SM
    Stephane M.
    2 September 2020 @ 12:33
    I'm leaving the city FOREVER. If you like to pay higher taxes, riots, police giving tickets for nothing...you can stay in LA ;-) I don't think it's a temporary factor. My sister is doing the same (and we don't really talk to each other). Your graph on the U.S. Rural and urban population is 10 YEARS OLD!!! Nothing is linear in real life. You can't say that because the trend WAS up that it will stay up forever and never turn down (unless you're a Tesla shareholder!!)
    • SN
      Sam N.
      2 September 2020 @ 16:48
      The graph is based on Census data which is every 10 years. So there will not be any new data until this year...10 years later. I would contend though that the new data will show a resumption of that trend. However, I personally know people moving from NYC forever, however half of those people are simply moving to smaller cities in different regions of the USA.
    • TE
      Tito E.
      2 September 2020 @ 18:26
      I'd take the other side of your trade over the medium to longterm. Even pandemics don't change human nature. To paraphrase Samuel Johnson "when a man is tired of the city, he is tired of life"
    • KB
      Kirk B.
      4 September 2020 @ 04:15
      The census definition of urban includes Urbanized Areas of over 50,000 and Urban Clusters of at least 2,500. The decades long urbanization trend will likely continue, BUT within that overall trend, there is clear movement from larger mega cities to smaller Urbanized Areas and even Urban Clusters. This trend was noted in the 2013 book America 3.0, and the Covid-19 pandemic, within the context of a networked society, is likely to accelerate this trend.
  • CS
    Christopher S.
    3 September 2020 @ 23:29
    I like this guy but People can only pay their rent just fine with never ending government transfer payments. No one will feel bad for landlords. Even if money printer go brr, the taxes hikes on property owners who cannot hide their wealth in dark pools and the Cayman Islands will be brutal. I am glad I only own one property.
  • gg
    gurdeep g.
    3 September 2020 @ 22:51
    I had a patient/client today 77years old, looking to sell up and buy a house with his daughter and son in law who is also selling up so togther they buy a larger home with an annex for the grandparents. Problem is, whenever they went to view one an offer had already been put in ( we are talking suburbs). His conclusion, they are not the only ones doing this as larger families battle it out for bigger homes in the suburbs. Anyway thought it was interesting :)
  • PG
    Philippe G.
    2 September 2020 @ 17:36
    Grateful to hear Mr. Halaris' thoughts and observations on real estate - someone who does this 24/7 Mass exodus from the urban cores and cities....I don't think so...."reset" of leasing rates and industry standards on lease terms & conditions, etc... more likely in my humble opinion. Unless you're very introverted or enjoy outdoor activities year-round, living in the suburbs and rural communities will get old real fast...
    • LF
      Liam F.
      2 September 2020 @ 20:37
      Living in suburbs gets old fast? Like everything else, it depends on your lifestyle. Living in smaller towns is awesome. I can't stand large city life. Gave it up years ago.
    • mb
      michael b.
      3 September 2020 @ 06:02
      I’m not so sure. Suburbs, esp in North Texas, have great dining, a multitude of outdoor activities, pool, parks, clubs of all types. There’s also much lower crime, stable government, lower taxes, and lower overall cost of living. Very high quality of life and value for the money. And then there’s WFH. If Covid was a one month affair, life would have quickly bounced back. But it didn’t and workers had time to build new habits for productivity. Many would take a pay cut to skip the commute entirely. Unless forced to they will not return to office life anytime soon, or at least not 5 days a week. My clients with office space are actively looking to reduce office footprint (mostly in the cities) and negotiate lower rents, even if it means leaving the city. So people might choose to remain living in cities, but it won’t be for easy access to work necessarily. But let’s be optimistic for a moment... say cities take a 10% hit to tax receipts. The results would be near catastrophic. Cities are already seriously strapped on fixed costs such as under-funded pensions, bond interest payments, and other liabilities. The cuts to parks, maintenance, beautification projects, etc. would be a blight on the city. Add in “defund the police” and the results might get ugly. No, cities aren’t going to die but they will be VERY sick for awhile. To think that will not eventually manifest in significantly discounted prices would be just too hopeful, I think.
    • PG
      Philippe G.
      3 September 2020 @ 11:45
      Liam F. - Yes, agreed. Hence my comment around if you're an introvert (i.e. a "homebody"), living in the suburbs or rural communities is feasible...
  • JP
    John P.
    3 September 2020 @ 09:23
    Enjoyed this perspective. I work in SoCal commercial real estate and it really is a mixed bag of bulls and confused skeptics. Every other broker I talk to seems to have a different outlook. I can confirm the large apartment projects tenants have surprisingly all paid their rent so far. I Really didn’t expect that.
  • dw
    douglas w.
    2 September 2020 @ 22:36
    Nick thanks for the thoughtful views, as always your thoughts on markets are honest and giving a range of possibilities which I appreciate. I think that we will have a bit of a shakeout in city residential, and your comments on commercial are prescient, more pain to come.
  • RM
    Robert M.
    2 September 2020 @ 18:43
    Housing starts as % of population. Have never looked at market through that lens. Around the 7 minute mark left in video.
  • RM
    Robert M.
    2 September 2020 @ 16:56
    Was in a Regal space recently and asked the question about usage. Receptionist said people had started coming back in the last couple of weeks though it was not busy while I was there. Do believe usage is picking up, but does it get back to 100%, hard to say.
  • JN
    Jack N.
    2 September 2020 @ 15:55
    very little discussion about opportunity costs of staying in cities today v opportunities costs of not as compared to yesteryear. Bad analysis. Today, very little opportunity or convenience costs of moving out of suburbs.
  • MK
    Michael K.
    2 September 2020 @ 13:36
    Happy to see this guest return. He uses a lot of things like “hard to say, this is the big question” etc instead “I know I know here’s my 100% foolproof forecast.” He speaks like someone who manages a book, not someone who manages a newsletter.
  • cg
    charles g.
    2 September 2020 @ 13:14
    Not sure why there are so many downvotes. This guy seems very balanced in his explanations and gives a strong case for both sides. Unlike the Mohtashhami guy who was like "nothing to see here, everything is 100% fine".