Midweek property news update - 23 June
New York’s rapid revival, retail turns a corner and the impending of super-prime surge
5 minutes to read
The revival of New York City
During a ceremony at One World Trade Center last week, New York governor Andrew Cuomo welcomed the lifting of nearly all remaining Covid-related restrictions in the state. His speech, noted the FT, was like a victory declaration after a long war.
The City is indeed battle scarred but the wounds are healing quickly. The state has now vaccinated 70% of its adult population. Traffic is close to pre-pandemic levels. Restaurants are crowded, flights are packed – even Yankee Stadium is back at full capacity.
Cities were predicted to be a major casualty of the pandemic, but everywhere you look - whether it's attendance at office buildings, or the migration of people from urban centres - what could have been a great reset looks a lot like business as usual.
And the read through to property markets is already showing. Following three years of softening prices, the prime residential market in New York City is on the cusp of a rapid recovery. Bidding wars are increasingly common and city-wide inventory, though still nominally above the long run average, has declined 23% since late summer. Robust sales activity will eat into that further. First quarter sales were just 4% shy of the long-run average
You can read more from me on New York's revival in Prime Resi this morning. While our current forecast has prime property prices in the city ending the year flat, I’m beginning to suspect a return to growth is now more likely.
Renting
Blackstone yesterday announced a $6 billion deal to buy Home Partners of America, a company that owns 17,000 single family rental properties in the United States.
Investors have for several years been flocking to purchase both single family units and purpose-built multi-family blocks in both Europe and the US, due to a range of factors that include a search for diversification and exposure to a range of demographics offered by owning thousands of individual units. It's clear other draws, including declining home ownership due to rising house prices, have grown more acute during the pandemic.
It's also becoming increasingly clear these markets provide virtually crisis-proof income streams. In the UK, for example, monthly rent collection across the Built-to-Rent sector averaged 96% between March and December 2020.
The Blackstone deal capitalises on other pandemic-related themes, namely swelling demand among consumers for larger, family homes. Institutional investment in the UK rental market has so far been largely focussed on blocks in key cities. The single family market, though nascent, is likely to grow rapidly over the medium term - see Apache Capital's May launch of its single-family housing platform Present Made.
Retail turns a corner?
J.P. Morgan analysts Neil Green and Tim Leckie say UK retail property "is turning a corner" following years of declines.
Their research cites a survey of more than 700 people suggesting people will spend more time in shopping malls and retail parks after the pandemic than they did before. Data from apps from retail sites with more than 8 million square feet of space show download activity is back at about 75% compared to last year's high point.
The flight to quality we are witnessing in office and residential markets is also embedded in the retail sector. Oversupply, rising costs, occupier over-expansion and underinvestment will continue to dog the sector, though best-in-class assets that have been subject to the sector-wide correction will indeed stage a recovery, according to Stephen Springham, Knight Frank's head of retail research.
Super prime London
London's luxury home market was to some extent isolated from the post-lockdown burst of housing market activity as travel restrictions weighed on the ability of international buyers to make purchases.
As the vaccination roll out progresses and travel reopens, sales are likely to pick up sharply. Our data suggests purchasers with a combined budget of £36.8 billion are now actively searching for super-prime homes (£10 million plus) in London—a jump of 54% compared to the five-year average.
Though that figure represents growth in new demand from new UK and international buyers, there is also a rise in demand from existing luxury home owners looking to buy a bigger, better, super-prime home in order to improve and expand their London base as a response to Covid’s impact on their lifestyle.
Staff shortages
The synced reopening of economies has placed acute pressure on supply chains and staff numbers - see last week's note on the dwindling supply of labourers for some specialist construction trades.
Claire Williams spots a looming shortage of transport and warehouse staff that threatens the growth of the booming logistics sector.
Job posts have been trending up since January and in the past couple of months have exceeded seasonal peaks. The number of roles currently being advertised is 173% higher than the same week in 2019, and about six times higher than the same period last year, when the UK was in the throes of the first lockdown.
Online jobs site Monster reports that over half of vacancies are for entry-level type positions, which typically can’t be filled by hiring people already working in similar jobs - firms must attract new workers into the sector.
In other news....
The stamp duty holiday tapers in ten days’ time. Tom Bill reveals which parts of the UK property market are likely to be most active over the summer.
Elsewhere - flexible rail tickets for the hybrid work era, WFH and the gradual erosion of social capital, UK factories see fastest output growth on record, confidence among UK employers hits a five year high, the US homes supply crunch, heavyweight investors demand more disclosure of environmental risks, a new generation of wealthy people are basing themselves in Dubai, Eurozone economy edges back towards pre-pandemic norms, pandemic mints 5.2 million new dollar millionaires, and finally, Morgan Stanley to bar unvaccinated staff and clients from New York office.
Photo by Luca Bravo on Unsplash