Speaker 1: This is Bloomberg Business Week with Carol Masser and Bloomberg
Speaker 1: Quick Takes Tim Stinovic from Bloomberg Radio. So let's dig
Speaker 1: a little bit deeper into commercial real estate. Back with
Speaker 1: us a friend of our show, Ken Swig is president
Speaker 1: of Swig Equity is a real estate development and investment firm.
Speaker 1: They focus on commercial and residential properties in New York City,
Speaker 1: also in California. And he is back with us on
Speaker 1: the phone in New York, Kent. It is good to
Speaker 1: have you back with us. How are you? I am good.
Speaker 1: It's nice to be back, and I'm in my office
Speaker 1: and working and it's uh, I'm more optimistic certainly than
Speaker 1: I have been in a long time. Well, that's what
Speaker 1: I was curious, because we talked. We caught up in
Speaker 1: I think December, around the holidays, and so here we
Speaker 1: are a couple of months later. Um, are you seeing
Speaker 1: more people come into your office? Are you've see more
Speaker 1: people come into some of the properties that you own?
Speaker 1: Tell us kind of the trends that you're hearing. Well, it's, um,
Speaker 1: it's beginning to happen a little bit. Yes, UM, I
Speaker 1: would say the average right now in New York City
Speaker 1: of occupancy, you know, people going into the building not
Speaker 1: least per se is about twelve percent maybe, so it
Speaker 1: hasn't changed all that significantly. However, Um, the activity level
Speaker 1: that we're seeing in terms of commercial in terms of
Speaker 1: tenants starting to look and starting to become more active,
Speaker 1: and certainly on the residential front, it's is active. It's
Speaker 1: has been since you know, the past six seven years. Um.
Speaker 1: So that's a good sign going forward. So i'd say
Speaker 1: a new deal transaction volume is starting to pick up.
Speaker 1: I don't know if you heard the quote from Jamie Diamond.
Speaker 1: We caught up with him are at Hammond did and
Speaker 1: you know he's talked about remote work will reduce the
Speaker 1: need for commercial real estate. You agree with him? I
Speaker 1: don't entirely. And then for two reasons. Um. First, I'll
Speaker 1: qualified by saying I think that some I think the
Speaker 1: idea of working from home is something that is part
Speaker 1: of our workforce today and has not been had not
Speaker 1: been previously, So that part I agree with him. However,
Speaker 1: I don't know that it's going to translate directly into
Speaker 1: into a less amount of office space being occupied. Um
Speaker 1: So whereas people there was Stanford University did a study, uh,
Speaker 1: just before covid um, which was interesting saying that about
Speaker 1: twenty of the people said of the workforce around the
Speaker 1: United States said they would be interested in working from
Speaker 1: home one day a week, and there was about thirty
Speaker 1: that said not a chance. Um. That I think would
Speaker 1: be very interesting to see where we are today, certainly, um,
Speaker 1: but I think one day a week somewhere in there
Speaker 1: people will be working from home. I think it's somewhat
Speaker 1: efficient to do that. Again, if you have a lot
Speaker 1: of emails one day and you want to work from
Speaker 1: home and answer them and not have office distraction or
Speaker 1: telephone distraction, Yes, it's good. Working from home is a
Speaker 1: factor and will continue past the covid um pandemic when
Speaker 1: we recede from that. However, that doesn't mean that we're
Speaker 1: going to translate into fewer amounts or less amount of
Speaker 1: square foot is being occupied. And the reason is because
Speaker 1: I think the trend since nine seven has been going
Speaker 1: to you know, more compact, more jammed together offices. From
Speaker 1: you know seven was about three fifty square feet per
Speaker 1: person and we dropped down to about a hundred and
Speaker 1: seventy square feet per person. I think that trend is
Speaker 1: going to be moving the other way, because I think
Speaker 1: health and safety and traffic flow is going to increase
Speaker 1: in terms of it's important. So um, you know, taking
Speaker 1: our temperatures going in during flu season. I think it's
Speaker 1: going to be part of everyday life. I think having
Speaker 1: occupancy of a little bit more space per person is
Speaker 1: going to be a part of our lives. So I
Speaker 1: don't see it translating into taking that much less space. Listen,
Speaker 1: you're you know someone who I can tell love New
Speaker 1: York like I do. I think that's safe to say.
Speaker 1: And it kind of kills me when I like drive
Speaker 1: down an avenue and see though how much real estate
Speaker 1: you know, especially retail space, and not a surprise, I guess, um,
Speaker 1: but it's rough to see so much boarded up and empty.
Speaker 1: And I do wonder what's what's the downfall? I mean,
Speaker 1: is there the commercial real estate market? Does it come undone?
Speaker 1: Or are you starting to see the private equity investors
Speaker 1: and other investors, I don't know, are you know, looking
Speaker 1: at some distressed properties? Are you looking at distressed properties? Well,
Speaker 1: yes we are. We're looking at to stress properties both
Speaker 1: commercial and residentially. UM, but specifically with the retail UM.
Speaker 1: Retail has been devastated, absolutely, no question about it. Retail
Speaker 1: depends on massive street traffic, people going out and feeling safe,
Speaker 1: all of which has not happened. But we are now
Speaker 1: with the third vaccine that's been cleared. Um, we're looking
Speaker 1: at a summer where you know, we're going to have
Speaker 1: a very high percentage of our population inoculated against the vaccine.
Speaker 1: And I think, well, people will be starting to go
Speaker 1: back out. Now, what's going to happen is what has happened,
Speaker 1: it's going to continue to happen is rents for retail
Speaker 1: is going to are going to continue to drop, and
Speaker 1: they have dropped. Um. Retail tenants have been hurt, and
Speaker 1: I think we're going to end up with a game
Speaker 1: of musical shares where tenants are going to be moving
Speaker 1: from one place to the other. And yes, it's going
Speaker 1: to take time to get the restaurants back up and operating,
Speaker 1: but they will come back up and they will be operating,
Speaker 1: and next the hotels will start getting back up and operating.
Speaker 1: And it's not going to happen in a month, but
Speaker 1: it's certainly going to take you know, it's gonna take
Speaker 1: six months, seven months before this stuff starts really coming back.
Speaker 1: But the energy level of people and the frustration level
Speaker 1: of people who have been inside for a long long
Speaker 1: time that want to get out and want to go
Speaker 1: do something is clearly they're led by the young population.
Speaker 1: If you go look in Miami right now, for instance,
Speaker 1: which is a different environment completely and and I won't
Speaker 1: give an opinion you know of Governor to Santos and
Speaker 1: what is what he's doing versus Governor of Cuomo in
Speaker 1: our state, but the restaurants nightclubs are heavily populated. Whether
Speaker 1: safe or not is another thing, but it just tells
Speaker 1: you that even in the middle of the pandemic, people's
Speaker 1: desire to go out and want to go do something
Speaker 1: is certainly there. So I think it comes back. Is
Speaker 1: there though, an ultimate fall out a long term impact
Speaker 1: impact on New York though? Or is it just a
Speaker 1: case of we're going to be using space differently? UM?
Speaker 1: I think the ultimate There is a long term impact,
Speaker 1: I think on on the hotel industry, particularly because the
Speaker 1: hotels have been closed for quite a long time. And um,
Speaker 1: I think the impact is on two fold. One. I
Speaker 1: think the management unions have to work together because under
Speaker 1: the contracts with the union contracts hotels couldn't open up
Speaker 1: partially because the contracts said that they can. You know,
Speaker 1: if you open up, you have to have a certain
Speaker 1: number of staff. I think it was not thought about
Speaker 1: for a pandemic environment. So I think that will change
Speaker 1: and allow for you know, it would have allowed for
Speaker 1: hotels to partially open but didn't. And to UM, there
Speaker 1: are a lot of hotels that just may not make it.
Speaker 1: And I think they may be converted into residential or
Speaker 1: some alternative space. So you know that, and and they
Speaker 1: are very dependent also on the airline industry and travel.
Speaker 1: So UM, I think that's the last piece that starts
Speaker 1: to come back. I think that the residential market is
Speaker 1: certainly coming back right now. It's very very active. UM.
Speaker 1: We we had you know, we had over forty contracts
Speaker 1: signed over four point four million dollars last week. We
Speaker 1: haven't seen anything like that since August of two thousand fifteen.
Speaker 1: Coming back or what is that people in New York
Speaker 1: just getting more space for a better price, or what
Speaker 1: is it? Well, it's a combination of everything. UM. At
Speaker 1: first in January and the beginning of a little bit
Speaker 1: of February. UM, what you saw is a lot of
Speaker 1: buying in one bedroom and studios. Because to get on
Speaker 1: the Merry Go Round when it was traveling quickly, um
Speaker 1: to use uh you know a little bit of a phrase. Um,
Speaker 1: it was very difficult and you jumped off. If you
Speaker 1: had jumped on and you missed, it hurt. Right Now
Speaker 1: the Merry Go Round slowed down a little bit, so
Speaker 1: you can jump on a lot easier. So a lot
Speaker 1: of first time buyers are coming into the market right
Speaker 1: now and getting a chance and where they buys one bedroom,
Speaker 1: two bedrooms, a part of the studios and one bedrooms.
Speaker 1: But we're now seeing is a lot more activity on
Speaker 1: all the levels. I think the lagging part of the
Speaker 1: marketplaces three bedrooms and and that inventory is built up, um,
Speaker 1: you know, significantly from being one of the hottest product
Speaker 1: types to being one of the lowest. To come back
Speaker 1: right now, Hey, one thing I wanted to ask you,
Speaker 1: and we caught up with our Emily Chang. She's marking
Speaker 1: ten years of Bloomberg Technology her broadcast. A lot has
Speaker 1: happened in the tech world in the last decade. What
Speaker 1: about what you're seeing on the West coast, Um, what's
Speaker 1: going to be the lasting impact of COVID let's say
Speaker 1: on on the San Francisco area or the Silicon Valley area.
Speaker 1: Do you play in the California market as well, But
Speaker 1: we're just talking about that this morning in a family
Speaker 1: meeting that we had. Um. You know, it's it's very
Speaker 1: interesting that the technology companies have been based out in
Speaker 1: Silicon Valley right just south of San Francisco. And what
Speaker 1: had been happening for the past ten years is that
Speaker 1: the major companies have had to provide free bus service,
Speaker 1: luxury liner type service for all their staff to go
Speaker 1: to Silicon Valley. Um. And because all the young staff
Speaker 1: wanted to live in a central city, I wanted the
Speaker 1: energy of the city and all that. So I don't
Speaker 1: think that's going away. Um Um. So the residential population
Speaker 1: and the and the and the pan for living in
Speaker 1: a you know, a very very dynamic environment isn't changing.
Speaker 1: And some of this and the tenants have moved into
Speaker 1: into San Francisco. We my family signed a lease with
Speaker 1: the Sana Corporation for over three square feet in a
Speaker 1: new building that was just built and and they are
Speaker 1: you know, putting in tennant improvements actively and looking to
Speaker 1: occupy this summer. So I'm cautiously optimistic, all right, crossing
Speaker 1: my fingers, and that you're gonna have to come back
Speaker 1: soon because they're running out of time. Can be well,
Speaker 1: nice to catch up with you. Ken Swig, President of
Speaker 1: Swig Equities,