Dear Friends,
I hope you and your family are well and keeping safe amidst the public health crisis we are all facing. Needless to say, COVID-19 has been an unprecedented catastrophe and continues to affect many, if not all industries, the real estate market included.
Most of us are eager and looking forward to the reopening of the economy in the days ahead, yet also cautious on how our new normal will be like. For now, it is evident that Skype, Zoom, WeChat and other teleconference mediums will be the standard format to support how we do business and communicate.
With that said, we will be launching the New York Metro CCIM Chapter Virtual Dealshare, our own online property dealmaking event that will showcase commercial property listings from our very own real estate broker-members. This is a virtual platform that will keep members engaged and updated with properties for purchase. We are looking for sponsors! More information can be found below.
In the months to come, we will continue to provide relevant news from a plethora of CRE and finance news from reliable sources. Hopefully, they can be used as a good resource and provide you with information to make well-informed decisions that impact your CRE practice as a CCIM professional or a CCIM in-training.
I wish you and your family the best of health. Be well!
Best,
-J.R.
(646) 481-3801
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1st Annual Virtual Dealshare Event
Save the Date | June 16, 2020 @ 10:30AM
Zoom Secured Conference
Submission guidelines:
- Property minimum price $750,000
- Broker listed property only
- New York Metro (New York City, Northern Jersey and Connecticut); may consider choice listings
- Complete 1-page template (download HERE and submit HERE)
- Deadline to submit properties is May 30 @ 5PM
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What impact has Covid-19 had on your business?
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It's not impacting my business
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It's starting to impact my business
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It's really impacting my business
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The impact is on the decline
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What best describes the impact Covid-19 has had on your business?
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Business is better than ever
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We have shut down temporarily?
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We have or will shut down permanently?
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Has your business applied for a CARES act loan?
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How many employees does your company have?
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Approved - waiting for money
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Approved - money received
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How long have you been in the business?
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Commercial Real Estate News
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Retail Bankruptcies Could Impact Industrial Supply and Rents
Industrial real estate has already been called a winner in this recession, and it isn’t hard to see why. The e-commerce business is booming (have you checked Amazon’s stock lately?) and industrial holders will be a direct beneficiary of that business, with some outlets already talking about the need for excess space. However, the industrial market isn’t invincible from the pandemic pain. Mandated retail closures will ultimately have an impact on industrial supply and rents, particularly in major markets like the Inland Empire.
“We are already seeing retailers filing for bankruptcy. Neiman Marcus is in the process of filing for bankruptcy, and Pier1 and JC Penney missed their bond payments and could be filing for bankruptcy. That will certainly impact the Inland Empire market,” Dave Burback, SVP and managing director at Kidder Mathews, tells GlobeSt.com. “JC Penney has 650,000 square feet in the Inland Empire. Where does that go? Rents are going to have to recess a bit.”
E-commerce could play a role in absorbing some of the excess space—which has already been a trend as shopping moves into the digital space. “I think a lot of this square footage will be taken by e-commerce companies,” adds Burback. “This has accelerated what was already happening in the retail commercial sector.” Even if the pandemic catalyzes future e-commerce growth, returned retail warehouse supply will put downward pressure on the market activity and rents, at least in the short term.
E-commerce is picking up new customers every day during shelter-in-place restrictions, but compared to the last few years, that growth rate will likely decline. “I think there will be growth,” says Burback. “The e-commerce piece of the industrial puzzle continues to drive Southern California, particularly the Inland Empire, but it is not bullet proof. Logistics and e-commerce is going to grow and move forward, but it won’t be as robust as it has been over the last three or four years.”
Restaurants will also have an impact on the industrial supply, particularly for cold storage space. Cold storage supply has struggled to keep up with boundless restaurant demand, but those businesses have shuttered, at least for the short-term. “I think the ripple effect is underestimated. If a restaurant closes, there is a ripple effect, starting with the people, unfortunately,” says Burback. “Beyond that, it reaches to food distributors, furniture suppliers and cold storage.”
Increased supply in some industrial segments will ultimately impact new construction as well, but not significantly. Burback expects price decreases to fall short of anything the market experienced in 2008. “I believe that land prices will be recalibrated. In the last major downturn, prices came down up to 50% in some cases,” he says. “I don’t see that here. I do not think there will be a 50% reduction in land prices, but there could be a 20% reduction in land prices moving forward.”
Source: Globe St.
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Life Sciences Might Be the “Least Disrupted” CRE Sector
In the midst of a pandemic, demand remains strong for life science buildings in major metropolitan areas, according to industry experts.
“Without a doubt, life sciences [sector] has fared the best over the last 60 to 90 days. Not surprisingly, it’s at the center of the crisis, if you think about all the mission-critical research that is happening right now,” says Steve Purpura, vice chairman with real estate services firm CBRE who directs the firm’s life sciences practice group, Northeast division. “As a society we’re much more vulnerable than we thought we were 90 days ago, and I think once we work our way out of this, there’s going to be a lot more capital going into the life sciences sector. All in all, by far, I would say the most positive news of any of the sectors that we deal with is in life science.”
The unemployment rate for life, physical and social science occupations, a broad field that includes chemists and epidemiologist as well as historians, political scientists and urban planners, averaged 4.2 percent in March 2020, according to the U.S. Bureau of Labor Statistics. Total U.S. unemployment rate in March was at 4.4 percent.
Typically, there are about one half to two thirds fewer people per sq. ft. working in a lab as there are in traditional office space, says Jeff Tompkins, founding partner at SGA, a New York City-based architecture, planning and design firm. Most labs require a significant amount of training before a person is qualified to be in or utilize lab space. That n itself limits the amount of people in a lab.
“The pandemic is shining a global spotlight on the increased need for R&D to fight this and future healthcare challenges. Cleary, life sciences remains an investor favorite and a space in which CA Ventures is fully committed,” says Russell Brenner, president of medical office and life sciences at CA Ventures, a Chicago-based real estate investment company.
Based on what the firm’s executives are hearing from its capital partners and universities, it expects investor appetite for R&D space to continue to grow. As a result, “we are bullish on the sector’s long-term outlook as we continue to evaluate how COVID-19 is impacting this and other real estate sectors,” Brenner notes.
There might even be a greater desire among investors to reposition existing traditional office buildings for life science use as office tenants are expected to move away from dense environments. The Boston market was already seeing the conversion trend before the COVID 19 pandemic and may see more micro life science clusters developing as the repositioning of office space continues. About 75 percent of the new work SGA has received during the COVID-19 pandemic is new life science projects, according to Tompkins.
The Boston area contains the largest U.S. life sciences cluster, and so is a good proxy for the U.S. life-sciences market, according to CBRE sources. The vacancy rate for lab space in Boston was at 7.5 percent in the first quarter, according to company data. There are 2.5 million sq. ft. of new life science space under construction in Boston, with 67 percent of this space pre-leased. An additional 1.3 million sq. ft. is shovel-ready, meaning the project is ready to go, but has not yet broken ground.
“We felt there [were] going to be some emerging markets that had more life science space and more life science activity,” says Purpura. “Coming out of this, I think that’s definitely going to be accelerated because the federal funding is going to go to, not just Boston-Cambridge, San Francisco, San Diego, it’s going to go to the institutions in academia and healthcare that are in major metropolitan areas.”
Philadelphia, New York City, Chicago and Atlanta are some of the markets that could benefit, he notes.
There is a strong possibility the New York City’s life science sector “could take off in a more robust way over the next three to five years,” as building acquisition costs might drop to a point where purchasing buildings previously occupied by office users can pencil out for life science users and investors, says Tompkins. These acquisitions and repositioning efforts would mostly likely occur with class-B and class-C office buildings.
In the Boston market, Tompkins expects to see further life science expansion in West Cambridge, Watertown, Waltham, Lexington and Bedford, as well as Somerville and South Boston.
“I recently spoke with an investor, mostly in conventional office, and they just dabbled into a speculative lab development in a major market. They reported to me that it was their best-performing building in their entire portfolio, which stretches nationally,” says Ian Anderson, CBRE’s Americas head of office research. “So, I think that says something. I think with the sector being more resilient, less impacted than a lot of other industries, and obviously it’s front and center in this particular crisis, it only reaffirms the long-term views and support behind this sector.”
Investors who are already active in the sector will continue to stick with it and those who were considering it might see its potential growth as a source of stability for their portfolios, Anderson says.
However, the life science sector is still seeing some fallout from the pandemic-related shutdowns.
“I want to be clear, the biotech industry, like all industries, has definitely been disrupted, it’s just [that] it’s been the least disrupted of all the different sectors,” says Purpura. “If hospitality is at one end, then life sciences is [at] the other, but still obviously dealing with it.”
Source: NREI
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CMBS Late Payments Starting to Mushroom
Data released by the CRE Finance Council on Friday found that more than 20 percent of hotel loans and 10 percent of retail loans in CMBS pools were more than 30 days late on mortgage payments as of April, up from less than 2 percent each the previous month.
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The percentage of CMBS loans more than 30 days late increased much less sharply for multifamily (to 5.8 percent from 2.7 percent in March) and industrial properties (to 4.6 percent from 1.4 percent in March), according to Trepp. Meanwhile, mortgages more than 30 days late backed by office properties declined slightly in April (to 2.3 percent from 2.6 percent), also according to Trepp.
Loans secured by hotels that have been transferred to special servicing nearly tripled in April to 6.0 percent from 2.2 percent in March, according to BofA Research and Intex. Retail properties in special servicing increased to 4.1 percent in April from 3.7 percent the prior month, while the numbers for other property types were flat.
The overall percentage of CMBS loans that have been transferred to special servicing was only 4.0 percent as of April, according to BofA/Intex, while the delinquency rate was 2.8 percent, according to Trepp, but both of those numbers are expected to rise sharply in coming months as closures continue. Many tenants made April loan payments with March income, when the quarantines started. Cash flow is expected to drop in April and May and possibly longer.
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The shutdown is particularly difficult for lodging and retail properties. Most hotels in the U.S. have either shut down or are operating at skeletal levels, while more than half of retail outlets nationwide are closed as a result of statewide remain-in-place orders as authorities attempt to stop the spread of Covid-19. Other asset types are not expected to be immune, however. More than 26 million Americans have filed for unemployment over the last four weeks due to business closures, which has created loss of income for properties in just about all property segments.
Feeling the pinch, borrowers have inundated loan servicers with requests to renegotiate terms by, for example, lowering loan coupons, extending the maturity date, and deferring payments by a year or more. “Everybody wants to negotiate forbearance,” one industry insider said.
Although the federal government has mandated that loans originated through government-sponsored enterprises Fannie Mae and Freddie Mac must be afforded 120 days of forbearance, servicers of non-agency CMBS must review each request individually. Some servicers say borrowers are going too far in their requests. For one thing, borrowers must prove that the loss of property income is due only to the impact of the pandemic.
Another issue is that some borrowers are requesting more than a year of forbearance, while servicers say it is far too soon to determine whether properties will experience lost income for that length of time. Requests for lengthy forbearance at this stage “don’t correspond to what we hope is the temporary nature of the environment we are in,” said one servicer. “A lot of these requests lack reasonableness,” said another. A more reasonable option for many servicers is to grant forbearance for 60 to 90 days, and to revisit the economy and impact on property performance at that point to determine how to proceed.
Source: CPExecutive
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Part II: Co-tenancy Clause in CRE Leases
Mall and shopping center owners around the country are getting ready to come face to face with a major legal hurdle: Co-tenancy clauses
With 100,000 stores set to close by 2025, mall owners face this legal hurdle next.
The coronavirus pandemic will accelerate the rate of permanent retail store closures, as sales shrink close to nothing with many shops temporarily shut to try to halt the spread of Covid-19. Liquidity also is drying up and finances are being squeezed. UBS is expecting there will be 100,000 stores permanently shut between now and the end of 2025.
Meantime, online sales as a percentage of total retail sales in the U.S. are expected to grow to 25% from 15% over that same timeframe, UBS analyst Michael Lasser said.
With another wave of department store closures inevitably looming, and some chains potentially filing for bankruptcy, landlords' phones will likely be ringing — with retailers on the other line demanding rent reductions or outright saying, "I'm leaving your mall."
Here's how co-tenancy clauses work, on a basic level: They are typically built into the leases of the specialty tenants, like a Gap or an AT&T store, in the middle of a mall, or the shops situated along a grocery-anchored shopping centers, like a Big Lots or a TJ Maxx.
The clauses will say something along the lines of:
"If less than 80% of space is occupied at this property at any given time, or if a major, anchor tenant like a department store or a grocery store goes dark here, the tenant is allowed a break in rent. Or the tenant is given the ability to terminate a lease early."
The clauses are meant to protect tenants when circumstances happen that are outside of their control.
Tom Mullaney, head of restructuring services at commercial real estate services firm JLL, said all of his retail clients are watching their co-tenancy clauses "like hawks."
"As majors close and do not reopen, my clients are pulling out their leases," Mullaney said. "The whole purpose of a mall is to generate large amounts of foot traffic." If you lose an anchor or two, the purpose is lost, he said, and retailers will have an opportunity to speak up.
A wave of retailers demanding rent reductions, or leaving malls and shopping centers entirely, would deal another blow to an industry that has already been struggling to fill excess space.
Store closures are nothing new. A record was announced in 2019. But the rate of closures is only going to accelerate due to the Covid-19 crisis. This could put some malls entirely out of business. Already, some retail landlords, including mall owners, are defaulting on their mortgage payments to lenders, CNBC reported.
Many analysts say America is still over-retailed. Currently, there are nine malls per 1 million households in the U.S., according to an analysis by UBS. That is up from eight malls per million in 1980, when retailers didn't even have websites, the firm said. Ironically, the number has grown as e-commerce has proliferated.
"This is where you'll really see malls start to suffer," said Daniel Herrold, a broker for Stan Johnson Company.
Source: CNBC
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Lending Corner: Number of CMBS Borrowers Inquiring about Payment Relief Doubles
A total of 5,420 CMBS conduit borrowers behind $100.7 billion of loans have inquired about getting payment relief as a result of actions taken to stem the coronavirus pandemic, according to Fitch Ratings.
The rating agency early this month started surveying master servicers to gauge how many borrowers were inquiring about payment relief.
By then, more than 2,600 borrowers with $49.1 billion of loans had done so. That number has more than doubled as another 2,777 borrowers totaling $51.5 billion of loans have inquired about getting some sort of relief during the two weeks through April 12. Fitch noted that the numbers reflect only inquiries for relief, as opposed to formal requests for relief.
Fitch collected its data from the four dominant master servicers: Wells Fargo Bank, KeyBank, Midland Loan Services and Berkadia Commercial Mortgage.
The rating agency said that since the pandemic started borrowers of $99.2 billion of loans, or 17 percent of the $583.8 billion CMBS universe, have sought relief. And 200 loans totaling $8.5 billion have transferred to special servicing. In addition, borrowers of 89 loans totaling $17.8 billion securitized through single-borrower transactions also have inquired about getting relief.
Fitch said the most common inquiries involved some sort of forbearance or permission to tap reserve funds to finance debt service or operating expense shortfalls. Borrowers, it said, have noted that tenants at their properties have closed their businesses in response to government mandates and as a result have come up short on rental payments, squeezing their ability to make their mortgage payments.
Meanwhile, Fitch said 645 borrowers representing $810.2 million of Freddie Mac loans that have been securitized have sought relief. No loans, however, have transferred to special servicing, but the rating agency said that might change as some markets, notably Las Vegas and Orlando, Florida, both of which are heavily reliant on tourism, could face extreme challenges. Borrowers of Freddie loans can request 90-day forbearance periods. If approved, any deferred payments would need to be repaid within a year.
Fitch noted that a similar program for CMBS loans likely wouldn't be enough.
"There isn't a 90-day mark that will bring back travelers, restore consumer confidence and bring commercial business back to normal", said Adam Fox, senior director at the rating agency. "Borrowers with hotels and retail assets with nonessential tenants will need more time to recover."
Source: Trepp
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Macro Economy: America’s Middle Class Gets Hit With Office Jobs Disappearing
A marketing specialist with a sales-training company, Simon lost his job along with several colleagues on April 7 -– less than two weeks into a state-wide lockdown to counter the pandemic. He says many who survived the firm’s layoffs saw their pay cut by 10%.
That’s happening all over the country.
A tsunami of job losses, which began among workers in restaurants, hotels and factories, is now reaching the offices of white-collar America --- where analysts and engineers find themselves among the rapidly swelling ranks of the unemployed.
Within a month, some 22 million people filed for jobless benefits, in what’s shaping up to be the worst rout for U.S. labor since the Great Depression. Data due Thursday is forecast to show another 4.5 million joined the line last week.
‘To the Bone’
A detailed breakdown by profession won’t be available for a couple more weeks. But it’s already clear that the layoffs span industries and income groups –- and they’re hitting many Americans who have never had to apply for such assistance before.
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“What we’re going to be seeing is cutting deeper to the bone,” said Diane Swonk, chief economist at Grant Thornton LLP. “There is this sort of sense of nowhere to hide, and more and more collateral damage.”
Read More: U.S. Job Losses Pass 22 Million as Gig Workers Await Aid
White-collar employees largely escaped the initial wave of coronavirus layoffs, often because the nature of their jobs meant it was easier to do them from home.
But even companies that managed to stay afloat have seen a big squeeze on revenue and profits, as large areas of the economy are shuttered. That’s triggering a second round of job cuts or furloughs, with office workers taking a bigger hit this time.
And managers are taking other steps too. In addition to reducing hours, a common measure in recessions, they’re also slashing pay levels –- which is much more unusual, and may be an ominous sign for the post-virus economy.
Salary cuts billed as temporary could easily end up as a more permanent feature of payrolls, with employees finding they’re expected to work for 10% or 20% less than before, according to Gregory Daco at Oxford Economics.
“That, sadly, is a reality of the recession that may potentially last longer,” he said.
‘Scary Time’
Lower incomes would hold back a rebound in consumer demand to support the economy once the virus is controlled. For now, workers who lost their jobs are forced back onto savings or government aid.
Christy Casanova was an associate marketing manager at a beauty tech start-up in California. It was the kind of work she was able to do from home, and she’d been doing that for about three weeks. Then she was laid off, along with many colleagues, via a Google Hangouts call on March 27.
“I have to stretch out whatever I have left in my bank account,” said Casanova, who’d finally been able to move into her own place in Hayward -- a commuter suburb of San Francisco -- and had also just bought a car. “It’s a scary time.”
Middle-class Americans went into the virus slump in better financial shape than before the 2008 crisis, with around $2,000 in liquid savings on average. Still, months without pay will put even those who’ve managed to build a nest egg under financial strain.
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Middle Class Cash
Liquid assets have improved for middle class families since the recession
In most states, unemployment systems are creaking under the unprecedented burden of applications, leading to delays in cash payments. The government is also providing direct payments of $1,200 or more to some households, as part of its virus relief plan, but the extent to which they’ll help depends on local costs of living.
‘The Other Side’
And the outlook for a rapid return to work is bleak.
Just a few months ago, job openings outnumbered the unemployed by more than a million. But openings in white-collar industries (a category that ranges from biotech to finance and accounting) plunged 22% between March 9 and April 6, according to Glassdoor.
Another hiring website, Indeed, estimates that on April 10, positions in IT and engineering were down about 30% from a year earlier, while in marketing the drop was 50%.
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With millions of newly unemployed Americans in the market for whatever jobs are out there, workers are likely to see their bargaining power sharply reduced – and it wasn’t great to start with.
Even during the record-long U.S. expansion that just ended, economists were debating why wages weren’t rising faster despite a historically low unemployment rate.
“When we get on the other side of the pandemic, it’s going to be a buyers’ market again for labor,” said Elise Gould at the Economic Policy Institute. “People will just be scrambling to get a job, any job.”
That’s pretty much how Simon in North Carolina feels, a couple of weeks into life as an unemployed father.
“I’m expecting to have a lower salary in whatever position I have next,” he said. “I would just be thankful if I can just get a marketing job in general. I mean, lower pay, higher pay, less benefits. Anything.”
Source: Bloomberg
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Cuomo Outlines Phased Plan to Reopen NY Economy
Gov. Andrew M. Cuomo on Tuesday outlined additional guidelines for the phased plan to re-open New York on a regional basis. Each of the state’s 10 regions must follow a series of procedures as part of the re-opening plan.
These procedures include a 12-point checklist, ranging from 14-day declines in regional COVID-19 hospitalization rates to plans by industries and individual businesses for keeping employees and consumers safe.
“We’ve come up with a phased plan to re-open New York, so every region in the state has the same opening template as we begin this process,” said Cuomo.
The governor also announced an advisory board of business, community and civic leaders statewide. Totaling more than 100 members, the roster includes New York real estate luminaries, such as Blackstone’s Jonathan Gray, RXR Realty’s Scott Rechler, Rudin Management’s William Rudin, Tishman Speyer’s Rob Speyer and the Real Estate Board of New York’s James Whelan.
Source: Connect
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Delivered groceries highlight cold storage demands
COVID-19 has shed light on logistical issues within shipping supply chains caused by the enormous demand for delivered goods. One of the issues is a need for more cold storage industrial space, which had already been on the rise thanks to the trending use of food delivery services. COVID-19 accelerated that demand as more and more people are ordering essential goods like groceries online. More cold storage warehouses will be needed in the last mile leg of the shipping journey, 75 to 100 million square feet according to CBRE estimates prior to the pandemic to meet increasing needs for the next five years.
Cold fusion
Greater demand for cold storage will also increase the demand for HVAC systems powered by IoT technology. Cold storage spaces have specific climate control needs, which can be costly. Owners and developers that are beginning to plan spec projects will want to integrate the most efficient technologies in order to get the best ROI in terms of energy usage. Cloud-based, intuitive technology helps facilities run more efficiently with less hands on deck and provides expanded remote capabilities, should the need arise again in the future.
Source: Propmodo
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Rental Insurance Could Come into Play Amid COVID Crisis
Millions of apartment renters across the U.S. have lost jobs and income in the economic crisis caused by the spread of the novel coronavirus. Many are working with landlords by making partial payments and creating payments plans.
But another aspect of the industry is being tested by the crisis: rental insurance products that have replaced security deposits for some renters.
Founded in 2015, Leaselock provides lease insurance that covers damages and lost rent for roughly one million apartment units. At the properties that use LeaseLock, renters don’t have to provide a security deposit to move in. Instead, they pay a premium $29 a month for a standard lease insurance policy. In return, LeaseLock agrees to pay for potential losses on the apartment, including up to $500 in damages and $5,000 in lost rent—or even $8,000 in high cost markets. LeaseLock then sells the risk of these policies on the reinsurance market.
LeaseLock does not carry to risk of these policies itself, but sells the risk to reinsurance companies. Claims on LeaseLock’s lease insurance are triggered when a lease is terminated with damages or an unpaid balance owed. So far these reinsurance companies have not significantly raised their prices for new policies.
“It works well for the resident and it works well for the managers,” says Rick Haughey, vice president of industry technology initiatives for NMHC. ”But how do you price that risk and has that changed?”
More than 26 million people have filed for unemployment in the five weeks since cities and state began to order non-essential businesses to close and residents to shelter in place to the slow the spread of the novel coronavirus.
"There’s risk attached to every renter now," says Mark Stringer, executive vice president for Avenue5, an apartment company with 70,000 units under management, including thousands covered by LeaseLock. "In the past, you may have had some owners say, 'Well, we have residents that never lose their jobs so we don’t have to worry.' Well, now you have to worry."
For April, the effects have been relatively muted.
The amount of rental income collected by apartment companies in April 2020 dropped 7 percent compared to the monthly average set earlier this year, according to LeaseLock.
That’s similar to National Multifamily Housing Council’s rent payment tracker which found that 89 percent of apartment households made a full or partial rent payment by April 19 in its survey of 11.5 million units of professionally managed apartment units across the country.
“It is not as dismal as we thought it was going to look in April,” says Reichen Kuhl, president, founder and chief of insurance and legal for LeaseLock, “Renters who can pay have paid.”
Numbers for May are expected to be worse, however.
Meanwhile, LeaseLock is helping its clients negotiate with residents who are having trouble.
“Right now, 100 percent of people having trouble are being offered concessions,” Kuhl says. “Almost all of these are good, steadily-paying residents, and apartment companies want to keep good stable residents in place.”
So far, renters in trouble seem to be taking these deals, according to early data from cities where the coronavirus struck first. In Seattle and Los Angeles, which issued “stay at home” orders relatively early, the share of people who paid only part of the April rent is much higher—and the amounts being paid seem to match the “50 percent” being offered by many apartment companies, according to LeaseLock.
“We did see a concerted shift towards partial payments,” says Rochelle Bailis, vice president for LeaseLock. “That shift was pretty dramatic in the hardest hit cities.”
For example, Irvine Company is enabling renters to defer 50 percent of their April and May rent payments over a six-month period, interest-free. All renters have to do is “request rent assist” to create a new payment schedule.
Many other apartment companies have halted evictions and offered similar plans – following the advice of trade groups, including both the National Multifamily Housing Council and the National Apartment Association.
Usually, when a renter is more than a month late in paying rent, the property manager will issue a “pay or quit” notice demanding payment. Cities, states and federal agencies have also created moratoriums on evictions covering a wide patchwork of jurisdictions.
All this comes as lawmakers consider further regulating or even outlawing security deposits, which may push more of the industry towards companies like LeaseLock, or the creation of their own installment plans.
“States are putting more regulations on security deposits,” says Rick Haughey, vice president of industry technology initiatives for NMHC. Legislators argue that having to pay a security deposit can be a barrier for many people to renting an apartment. “Most people just don’t have two month’s rent,” says Haughey.
In Cincinnati, Ohio, landlords must now offer renter alternatives to paying a security deposit, according to that city’s new Renter’s Choice Law, which went into effect in April 2020. Lawmakers in Philadelphia have proposed legislation (House Bill 2427) that could lay the groundwork for total deposit replacement, according to Kuhl. Other new rules include limits on the amount property managers can collect as security deposits, how the money is held in escrow and in some places requirements that the deposit can be paid in installments.
Source: NREI
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CRE Broker Resource
Evaluating The “New Normal” for Commercial Real Estate
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