WeWork Struggles and Suburbs Grow: October Multifamily News Roundup
The Biggest October 2020 Real Estate News
We have summarized the three biggest multifamily and real estate stories to emerge in October. WeWork continues to struggle as many avoid offices, with some former urbanites decamping for suburbs and commuter towns. In big news for multifamily services companies, Cushman & Wakefield attempted to sell to Newmark, but was rebuffed.
WeWork Continues to Struggle
WeWork executives may have hoped for a relaxed 2020 after last year’s departure of founder Adam Neumann and the dramatic implosion of their efforts to go public. COVID deferred the realization of those hopes. The company has struggled with low renewals and has had to issue concessions to retain some tenants as the pandemic continues. As at some competitor companies, WeWork executives have elected to close struggling locations. In late October, Fitch, a rating agency, downgraded WeWork’s rating from CCC+ to CCC. The agency stated that the company may default, and securing new capital sources if that happens will prove challenging.
If WeWork can survive these difficulties until a viable vaccine, changes to work culture caused by the pandemic may help it achieve profitability. Small and mid-market businesses that intend to allow workers to telecommute permanently will not need as many dedicated desks or amenities. These companies will make natural tenants for WeWork and its competitors as they choose to rely on “hot desks” and facilities shared with other tenants, such as conference rooms and kitchens.
Families and Renters Head to Suburbs
As the pandemic drags on and companies continue to delay returning to the office, the wave of people moving from cities to suburbs continues. For the last decade or so, young professionals tended to prefer apartments in cities, exchanging high rental costs for shorter commutes and ease of access to restaurants and cultural attractions. With access to those made fraught by the pandemic, large suburban apartments with green space nearby seem all the more appealing to renters. These departures began to occur before the pandemic, but have accelerated since March.
Renters are not alone in leaving cities. Young families have accelerated pre-existing plans to move from places like New York. In New York’s case, commuter towns on Long Island or in Connecticut have proven popular for those leaving. In the short term, companies with the ability to quickly deploy capital, like JPMorgan, will benefit from the trend.
Cushman & Wakefield Considers Sale
Cushman & Wakefield reportedly approached competitor Newmark Group in early October, seeking to gauge Newmark’s interest in acquiring Cushman. Newmark did not act on the offer, reportedly due to Cushman’s $3.8 billion in debt. The combination of Cushman and Newmark would have continued a trend of consolidation in the real estate brokerage space. DTZ already acquired Cushman in 2015, with the combined firm retaining the Cushman name and branding. Other blockbuster deals include JLL’s acquisition of HFF in mid-2019.
- Large leases signed by tech companies in Manhattan have been a welcome relief for office owners.
- Numbers released in October show that housing starts increased in September.
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