WEBVTT - Swig on Real Estate Markets Reopening

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<v Speaker 1>This is Bloomberg Business Week with Carol Masser and Bloomberg

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<v Speaker 1>Quick Takes Tim Stinovic from Bloomberg Radio. So let's dig

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<v Speaker 1>a little bit deeper into commercial real estate. Back with

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<v Speaker 1>us a friend of our show, Ken Swig is president

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<v Speaker 1>of Swig Equity is a real estate development and investment firm.

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<v Speaker 1>They focus on commercial and residential properties in New York City,

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<v Speaker 1>also in California. And he is back with us on

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<v Speaker 1>the phone in New York, Kent. It is good to

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<v Speaker 1>have you back with us. How are you? I am good.

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<v Speaker 1>It's nice to be back, and I'm in my office

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<v Speaker 1>and working and it's uh, I'm more optimistic certainly than

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<v Speaker 1>I have been in a long time. Well, that's what

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<v Speaker 1>I was curious, because we talked. We caught up in

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<v Speaker 1>I think December, around the holidays, and so here we

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<v Speaker 1>are a couple of months later. Um, are you seeing

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<v Speaker 1>more people come into your office? Are you've see more

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<v Speaker 1>people come into some of the properties that you own?

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<v Speaker 1>Tell us kind of the trends that you're hearing. Well, it's, um,

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<v Speaker 1>it's beginning to happen a little bit. Yes, UM, I

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<v Speaker 1>would say the average right now in New York City

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<v Speaker 1>of occupancy, you know, people going into the building not

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<v Speaker 1>least per se is about twelve percent maybe, so it

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<v Speaker 1>hasn't changed all that significantly. However, Um, the activity level

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<v Speaker 1>that we're seeing in terms of commercial in terms of

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<v Speaker 1>tenants starting to look and starting to become more active,

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<v Speaker 1>and certainly on the residential front, it's is active. It's

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<v Speaker 1>has been since you know, the past six seven years. Um.

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<v Speaker 1>So that's a good sign going forward. So i'd say

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<v Speaker 1>a new deal transaction volume is starting to pick up.

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<v Speaker 1>I don't know if you heard the quote from Jamie Diamond.

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<v Speaker 1>We caught up with him are at Hammond did and

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<v Speaker 1>you know he's talked about remote work will reduce the

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<v Speaker 1>need for commercial real estate. You agree with him? I

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<v Speaker 1>don't entirely. And then for two reasons. Um. First, I'll

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<v Speaker 1>qualified by saying I think that some I think the

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<v Speaker 1>idea of working from home is something that is part

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<v Speaker 1>of our workforce today and has not been had not

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<v Speaker 1>been previously, So that part I agree with him. However,

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<v Speaker 1>I don't know that it's going to translate directly into

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<v Speaker 1>into a less amount of office space being occupied. Um

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<v Speaker 1>So whereas people there was Stanford University did a study, uh,

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<v Speaker 1>just before covid um, which was interesting saying that about

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<v Speaker 1>twenty of the people said of the workforce around the

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<v Speaker 1>United States said they would be interested in working from

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<v Speaker 1>home one day a week, and there was about thirty

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<v Speaker 1>that said not a chance. Um. That I think would

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<v Speaker 1>be very interesting to see where we are today, certainly, um,

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<v Speaker 1>but I think one day a week somewhere in there

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<v Speaker 1>people will be working from home. I think it's somewhat

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<v Speaker 1>efficient to do that. Again, if you have a lot

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<v Speaker 1>of emails one day and you want to work from

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<v Speaker 1>home and answer them and not have office distraction or

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<v Speaker 1>telephone distraction, Yes, it's good. Working from home is a

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<v Speaker 1>factor and will continue past the covid um pandemic when

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<v Speaker 1>we recede from that. However, that doesn't mean that we're

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<v Speaker 1>going to translate into fewer amounts or less amount of

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<v Speaker 1>square foot is being occupied. And the reason is because

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<v Speaker 1>I think the trend since nine seven has been going

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<v Speaker 1>to you know, more compact, more jammed together offices. From

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<v Speaker 1>you know seven was about three fifty square feet per

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<v Speaker 1>person and we dropped down to about a hundred and

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<v Speaker 1>seventy square feet per person. I think that trend is

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<v Speaker 1>going to be moving the other way, because I think

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<v Speaker 1>health and safety and traffic flow is going to increase

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<v Speaker 1>in terms of it's important. So um, you know, taking

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<v Speaker 1>our temperatures going in during flu season. I think it's

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<v Speaker 1>going to be part of everyday life. I think having

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<v Speaker 1>occupancy of a little bit more space per person is

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<v Speaker 1>going to be a part of our lives. So I

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<v Speaker 1>don't see it translating into taking that much less space. Listen,

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<v Speaker 1>you're you know someone who I can tell love New

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<v Speaker 1>York like I do. I think that's safe to say.

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<v Speaker 1>And it kind of kills me when I like drive

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<v Speaker 1>down an avenue and see though how much real estate

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<v Speaker 1>you know, especially retail space, and not a surprise, I guess, um,

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<v Speaker 1>but it's rough to see so much boarded up and empty.

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<v Speaker 1>And I do wonder what's what's the downfall? I mean,

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<v Speaker 1>is there the commercial real estate market? Does it come undone?

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<v Speaker 1>Or are you starting to see the private equity investors

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<v Speaker 1>and other investors, I don't know, are you know, looking

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<v Speaker 1>at some distressed properties? Are you looking at distressed properties? Well,

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<v Speaker 1>yes we are. We're looking at to stress properties both

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<v Speaker 1>commercial and residentially. UM, but specifically with the retail UM.

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<v Speaker 1>Retail has been devastated, absolutely, no question about it. Retail

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<v Speaker 1>depends on massive street traffic, people going out and feeling safe,

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<v Speaker 1>all of which has not happened. But we are now

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<v Speaker 1>with the third vaccine that's been cleared. Um, we're looking

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<v Speaker 1>at a summer where you know, we're going to have

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<v Speaker 1>a very high percentage of our population inoculated against the vaccine.

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<v Speaker 1>And I think, well, people will be starting to go

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<v Speaker 1>back out. Now, what's going to happen is what has happened,

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<v Speaker 1>it's going to continue to happen is rents for retail

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<v Speaker 1>is going to are going to continue to drop, and

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<v Speaker 1>they have dropped. Um. Retail tenants have been hurt, and

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<v Speaker 1>I think we're going to end up with a game

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<v Speaker 1>of musical shares where tenants are going to be moving

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<v Speaker 1>from one place to the other. And yes, it's going

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<v Speaker 1>to take time to get the restaurants back up and operating,

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<v Speaker 1>but they will come back up and they will be operating,

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<v Speaker 1>and next the hotels will start getting back up and operating.

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<v Speaker 1>And it's not going to happen in a month, but

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<v Speaker 1>it's certainly going to take you know, it's gonna take

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<v Speaker 1>six months, seven months before this stuff starts really coming back.

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<v Speaker 1>But the energy level of people and the frustration level

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<v Speaker 1>of people who have been inside for a long long

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<v Speaker 1>time that want to get out and want to go

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<v Speaker 1>do something is clearly they're led by the young population.

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<v Speaker 1>If you go look in Miami right now, for instance,

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<v Speaker 1>which is a different environment completely and and I won't

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<v Speaker 1>give an opinion you know of Governor to Santos and

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<v Speaker 1>what is what he's doing versus Governor of Cuomo in

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<v Speaker 1>our state, but the restaurants nightclubs are heavily populated. Whether

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<v Speaker 1>safe or not is another thing, but it just tells

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<v Speaker 1>you that even in the middle of the pandemic, people's

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<v Speaker 1>desire to go out and want to go do something

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<v Speaker 1>is certainly there. So I think it comes back. Is

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<v Speaker 1>there though, an ultimate fall out a long term impact

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<v Speaker 1>impact on New York though? Or is it just a

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<v Speaker 1>case of we're going to be using space differently? UM?

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<v Speaker 1>I think the ultimate There is a long term impact,

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<v Speaker 1>I think on on the hotel industry, particularly because the

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<v Speaker 1>hotels have been closed for quite a long time. And um,

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<v Speaker 1>I think the impact is on two fold. One. I

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<v Speaker 1>think the management unions have to work together because under

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<v Speaker 1>the contracts with the union contracts hotels couldn't open up

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<v Speaker 1>partially because the contracts said that they can. You know,

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<v Speaker 1>if you open up, you have to have a certain

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<v Speaker 1>number of staff. I think it was not thought about

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<v Speaker 1>for a pandemic environment. So I think that will change

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<v Speaker 1>and allow for you know, it would have allowed for

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<v Speaker 1>hotels to partially open but didn't. And to UM, there

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<v Speaker 1>are a lot of hotels that just may not make it.

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<v Speaker 1>And I think they may be converted into residential or

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<v Speaker 1>some alternative space. So you know that, and and they

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<v Speaker 1>are very dependent also on the airline industry and travel.

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<v Speaker 1>So UM, I think that's the last piece that starts

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<v Speaker 1>to come back. I think that the residential market is

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<v Speaker 1>certainly coming back right now. It's very very active. UM.

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<v Speaker 1>We we had you know, we had over forty contracts

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<v Speaker 1>signed over four point four million dollars last week. We

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<v Speaker 1>haven't seen anything like that since August of two thousand fifteen.

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<v Speaker 1>Coming back or what is that people in New York

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<v Speaker 1>just getting more space for a better price, or what

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<v Speaker 1>is it? Well, it's a combination of everything. UM. At

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<v Speaker 1>first in January and the beginning of a little bit

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<v Speaker 1>of February. UM, what you saw is a lot of

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<v Speaker 1>buying in one bedroom and studios. Because to get on

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<v Speaker 1>the Merry Go Round when it was traveling quickly, um

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<v Speaker 1>to use uh you know a little bit of a phrase. Um,

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<v Speaker 1>it was very difficult and you jumped off. If you

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<v Speaker 1>had jumped on and you missed, it hurt. Right Now

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<v Speaker 1>the Merry Go Round slowed down a little bit, so

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<v Speaker 1>you can jump on a lot easier. So a lot

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<v Speaker 1>of first time buyers are coming into the market right

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<v Speaker 1>now and getting a chance and where they buys one bedroom,

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<v Speaker 1>two bedrooms, a part of the studios and one bedrooms.

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<v Speaker 1>But we're now seeing is a lot more activity on

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<v Speaker 1>all the levels. I think the lagging part of the

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<v Speaker 1>marketplaces three bedrooms and and that inventory is built up, um,

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<v Speaker 1>you know, significantly from being one of the hottest product

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<v Speaker 1>types to being one of the lowest. To come back

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<v Speaker 1>right now, Hey, one thing I wanted to ask you,

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<v Speaker 1>and we caught up with our Emily Chang. She's marking

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<v Speaker 1>ten years of Bloomberg Technology her broadcast. A lot has

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<v Speaker 1>happened in the tech world in the last decade. What

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<v Speaker 1>about what you're seeing on the West coast, Um, what's

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<v Speaker 1>going to be the lasting impact of COVID let's say

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<v Speaker 1>on on the San Francisco area or the Silicon Valley area.

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<v Speaker 1>Do you play in the California market as well, But

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<v Speaker 1>we're just talking about that this morning in a family

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<v Speaker 1>meeting that we had. Um. You know, it's it's very

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<v Speaker 1>interesting that the technology companies have been based out in

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<v Speaker 1>Silicon Valley right just south of San Francisco. And what

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<v Speaker 1>had been happening for the past ten years is that

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<v Speaker 1>the major companies have had to provide free bus service,

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<v Speaker 1>luxury liner type service for all their staff to go

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<v Speaker 1>to Silicon Valley. Um. And because all the young staff

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<v Speaker 1>wanted to live in a central city, I wanted the

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<v Speaker 1>energy of the city and all that. So I don't

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<v Speaker 1>think that's going away. Um Um. So the residential population

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<v Speaker 1>and the and the and the pan for living in

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<v Speaker 1>a you know, a very very dynamic environment isn't changing.

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<v Speaker 1>And some of this and the tenants have moved into

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<v Speaker 1>into San Francisco. We my family signed a lease with

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<v Speaker 1>the Sana Corporation for over three square feet in a

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<v Speaker 1>new building that was just built and and they are

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<v Speaker 1>you know, putting in tennant improvements actively and looking to

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<v Speaker 1>occupy this summer. So I'm cautiously optimistic, all right, crossing

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<v Speaker 1>my fingers, and that you're gonna have to come back

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<v Speaker 1>soon because they're running out of time. Can be well,

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<v Speaker 1>nice to catch up with you. Ken Swig, President of

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<v Speaker 1>Swig Equities,