WEBVTT - Markets, REITs, And Flying Private 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.520 with essential market moving news. Find the Bloomberg Markets podcast 0:00:15.560 --> 0:00:18.479 called Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.400 at Bloomberg dot com slash podcast. All right, let's check 0:00:22.440 --> 0:00:26.360 in with Adam Kunsi's a portfolio manager at Winthrop Capital Management. 0:00:26.680 --> 0:00:29.319 Adam tough start to the week here, what do you 0:00:29.320 --> 0:00:32.720 just make it today's trading? They thanks for having me. Yeah, 0:00:32.760 --> 0:00:35.720 I mean, I think volatility is going to be the 0:00:35.720 --> 0:00:38.279 theme for the first quarter. This seems a little bit 0:00:38.320 --> 0:00:40.800 like deja bou of the first quarter of last year, 0:00:40.840 --> 0:00:44.400 where we saw interest rates start to pick up and 0:00:44.680 --> 0:00:48.599 you know, obviously meaningly meaningfully kicking up this year. At 0:00:48.600 --> 0:00:51.680 the same time that's kind of pushing technology to roll over, 0:00:52.840 --> 0:00:55.120 and right now we're dealing with the fact that that 0:00:55.200 --> 0:01:00.000 the consumer is starting to weekend as well, just an 0:01:00.040 --> 0:01:02.640 and their behavior and the mentality on what they're doing, 0:01:02.720 --> 0:01:05.360 what they're spending money on. So altility is going to 0:01:05.400 --> 0:01:09.680 be here for the foreseeable future. So what kind of 0:01:09.760 --> 0:01:12.760 rate increases they're expecting, what kind of curve flattening you're expecting, 0:01:12.760 --> 0:01:16.160 and what what does that due to risk assets? Yeah, 0:01:16.160 --> 0:01:19.600 so I mean the curse flatten considerably h eighty basis 0:01:19.600 --> 0:01:22.080 points just over the last three months or so. So 0:01:22.560 --> 0:01:26.319 the bond market is absolutely telling you that that there's 0:01:26.360 --> 0:01:30.480 something going on here um and and to just blame 0:01:30.520 --> 0:01:34.120 it on COVID and COVID variants I think is incorrect 0:01:34.200 --> 0:01:36.679 way to look at. And if you looked at retail 0:01:36.800 --> 0:01:41.679 sales after the delta Barrea came out, actually jumped, but 0:01:41.720 --> 0:01:45.240 if you look at the reading here in December, saw 0:01:45.280 --> 0:01:47.760 the retail still has actually rolled over. And then you 0:01:47.800 --> 0:01:51.760 look at savings rates are now back to pre COVID levels, 0:01:52.120 --> 0:01:55.760 and then just most recently consumer sentiment was back at 0:01:55.760 --> 0:01:59.440 its lows. So all of those factors are going to 0:01:59.600 --> 0:02:03.000 lead to a slowing economy, which you're seeing in the 0:02:03.000 --> 0:02:04.520 flattening of the OL curve. And we think that's going 0:02:04.560 --> 0:02:08.040 to continue to get worse because the Feds likely not 0:02:08.120 --> 0:02:11.080 going to take their foot off of the accelerator of 0:02:11.080 --> 0:02:15.799 of tightening their policy. They seem pretty ole bent on 0:02:15.360 --> 0:02:20.400 on tightening and raising rates. So likely we see them 0:02:20.400 --> 0:02:23.960 invert the curve, and so just you know, from that standpoint, 0:02:24.000 --> 0:02:26.320 it's just a matter of time when we see some 0:02:26.360 --> 0:02:28.680 sort of recession at the market. All right, So given 0:02:28.720 --> 0:02:32.000 that backdrop, Adam, kind of where are you thinking about, 0:02:32.040 --> 0:02:37.840 you know, allocating capital? Uh? Yeah, So, I mean, if 0:02:37.840 --> 0:02:40.000 you think rates are gonna go up, you would think 0:02:40.000 --> 0:02:43.080 fixed incomes not the place to be. But we particularly 0:02:43.080 --> 0:02:46.080 like the long end of the curve. Credit spreads have 0:02:46.280 --> 0:02:50.079 widened a little bit of the last couple of weeks. 0:02:50.080 --> 0:02:53.640 So looking at your high quality thirty year bonds, I 0:02:53.639 --> 0:02:55.960 think is a good place to be. You get some 0:02:56.040 --> 0:02:58.960 yield pick up and there is potential for spread tightening. 0:02:59.280 --> 0:03:03.560 But really the theme is moving up in quality, whether 0:03:03.600 --> 0:03:05.680 you're in fixed income like I just mentioned, or even 0:03:05.680 --> 0:03:10.040 in stocks. And really when we talk about high quality stocks, 0:03:10.040 --> 0:03:13.400 it's it's a lot of the names that that we've 0:03:14.240 --> 0:03:16.240 been in and that have worked over the last couple 0:03:16.240 --> 0:03:18.760 of years. It's kind of question of, you know, do 0:03:18.760 --> 0:03:20.760 you leave with the way you came to the dance 0:03:20.840 --> 0:03:23.560 with and I think we do. Um And when you 0:03:23.560 --> 0:03:26.320 look at companies like Apple and Microsoft's obviously in the 0:03:26.360 --> 0:03:30.320 news today and Alphabet, they have business models that can 0:03:31.080 --> 0:03:36.560 be sustainable through uh economic swings like we saw through 0:03:36.720 --> 0:03:39.520 through COVID. We've seen it time and time again that 0:03:39.640 --> 0:03:43.040 as as those companies sell off because investors think either 0:03:43.120 --> 0:03:46.480 rates are going up and valuations are gonna come back down, 0:03:47.120 --> 0:03:49.480 they sell, but then they come right back into them 0:03:49.480 --> 0:03:51.600 because at the end of the day, they're cash flow 0:03:51.640 --> 0:03:55.880 machines that that effectively have turned themselves into the most 0:03:55.920 --> 0:03:58.640 defensive stocks in the SMP five. So we think that's 0:03:58.640 --> 0:04:00.760 going to continue to work, all right, Adam, thanks so 0:04:00.840 --> 0:04:04.200 much for joining us. Always appreciate getting your perspective. Adam 0:04:04.240 --> 0:04:08.160 Coon's portfolio manager for Winthrop Capital Management. I note here 0:04:08.200 --> 0:04:16.320 he is a graduate of Indiana University. A Hoosier. Rough 0:04:16.440 --> 0:04:21.080 start to the trading week here, inflation, rising interest rates, 0:04:21.240 --> 0:04:27.039 concerns about the FEDS aggressiveness, all factoring into some unsteady 0:04:27.120 --> 0:04:29.520 trading show. We say, let's bring in a professional does 0:04:29.560 --> 0:04:32.120 this stuff for living? Liz Young, head of investment strategy 0:04:32.200 --> 0:04:34.520 for so Far. So, Liz, when you see a day 0:04:34.560 --> 0:04:38.240 like today, I'm assuming it gets your attention. Anything more 0:04:38.279 --> 0:04:42.360 than that, well, of course it gets our attention, it 0:04:42.839 --> 0:04:45.960 gets everybody's attention, I'm sure, But when you see a 0:04:46.040 --> 0:04:48.239 day like today and even a month like we're having 0:04:48.360 --> 0:04:52.039 in January, I think it's to be expected given the 0:04:52.160 --> 0:04:54.840 environment that we're entering. And this is an environment that 0:04:55.320 --> 0:04:57.200 is new to a lot of us, and it's something 0:04:57.200 --> 0:05:00.240 that I think still has a lot of uncertainty around it, 0:05:00.320 --> 0:05:05.480 around the paths of rate hikes, the speed of quantitative tightening, 0:05:05.920 --> 0:05:09.479 and the market is trying to understand what can still 0:05:09.520 --> 0:05:12.920 win in this space. And the tina I hate to 0:05:12.960 --> 0:05:15.360 use that acronym. I think it's very overused, but that 0:05:15.440 --> 0:05:19.400 tina mentality still very much at play because stocks offer 0:05:19.480 --> 0:05:24.919 the best reward opportunity. It's still better than fomo, UM 0:05:24.920 --> 0:05:28.800 and yolo definitely better than you. That's true. That's true. UM. 0:05:28.839 --> 0:05:33.320 So I wonder when you're when you're looking at UM, 0:05:33.520 --> 0:05:36.680 a way to hedge against inflation? Is our stocks? The 0:05:36.720 --> 0:05:38.839 best way? Do you think? I mean depends obviously on 0:05:38.880 --> 0:05:42.080 what you buy, but UM, is there anything else that's better? 0:05:43.920 --> 0:05:46.360 I think stocks are the best bet right now because 0:05:46.400 --> 0:05:48.440 we're in a place where the set is trying to 0:05:48.520 --> 0:05:52.599 control inflation. Right so, if you're looking at let's say 0:05:52.640 --> 0:05:55.280 six months out, the set is trying to control inflation 0:05:55.520 --> 0:06:01.120 on input costs and food and energy, so commodities are 0:06:01.120 --> 0:06:04.400 going to see a volatile period. Uh as the said 0:06:04.440 --> 0:06:06.160 tries to put a lid on a lot of that 0:06:06.240 --> 0:06:09.680 price pressure that's moving upward. So when you look at stocks, 0:06:09.720 --> 0:06:12.200 you have to choose your spots. But stocks can still 0:06:12.240 --> 0:06:15.080 do pretty well in an inflationary environment. I think there's 0:06:15.080 --> 0:06:18.360 been this belief that the stock market has to fall 0:06:18.400 --> 0:06:21.320 if there's inflation, and that inflation is all bad, and 0:06:21.400 --> 0:06:24.080 that's not true. It's just that certain pockets of the 0:06:24.120 --> 0:06:26.480 stock market are not going to do as well as 0:06:26.520 --> 0:06:30.200 they did in a low inflationary environment. And that namely 0:06:30.320 --> 0:06:33.280 is tech or even just the NASDAC broadly given all 0:06:33.320 --> 0:06:36.040 of its tech exposure. And you look at things like 0:06:36.080 --> 0:06:39.080 the broader SMP or the TAO, or even small caps, 0:06:39.120 --> 0:06:41.200 even though I know that the growthy part of small 0:06:41.240 --> 0:06:44.320 caps are really getting hurt this year already. Uh, there 0:06:44.360 --> 0:06:46.919 are pockets of the stock market that can do really well. 0:06:46.960 --> 0:06:49.480 And I would point out look at the spread between 0:06:49.520 --> 0:06:53.159 small cap growth and small cap value. Small cap value 0:06:53.160 --> 0:06:56.520 coming into today was actually positive year to date, small 0:06:56.600 --> 0:07:00.320 capt growth down almost eight percent. So it matters is 0:07:00.400 --> 0:07:03.159 the style that you're in. It matters the sector allocations 0:07:03.200 --> 0:07:06.279 that you have in an inflationary environment. Liz, we've seen 0:07:06.279 --> 0:07:09.280 a big move up in oil prices and the in 0:07:09.360 --> 0:07:12.200 the energy space here again, oil w t A crewed 0:07:12.240 --> 0:07:14.440 up another one point three percent today, that just under 0:07:14.440 --> 0:07:17.240 eighty five dollars a barrel, continuing its climb. How do 0:07:17.240 --> 0:07:19.960 you think about energy stocks here? Is there more room 0:07:20.200 --> 0:07:24.000 to grow? Yeah? I do think there's more room to 0:07:24.040 --> 0:07:26.840 go in energy, not only in oil prices but in 0:07:27.000 --> 0:07:29.640 energy stocks. Uh. And I don't think it's necessarily a 0:07:29.680 --> 0:07:31.840 long term play, but I think in the short term 0:07:31.840 --> 0:07:35.840 here a tactical opportunity and energy, especially as in the 0:07:35.880 --> 0:07:38.880 next few months we exit the winter months, and as 0:07:38.920 --> 0:07:41.560 you see, every time we have a new variant, we 0:07:41.680 --> 0:07:44.880 don't lock down nearly as hard right across the globe, 0:07:44.920 --> 0:07:48.560 so travel has really continued through oh Macron, and I 0:07:48.600 --> 0:07:51.240 think any new bouts of a new variant that we 0:07:51.320 --> 0:07:54.640 may have, travel will continue through that as well. And 0:07:54.880 --> 0:07:57.680 that's just going to drive more demand for energy. And 0:07:57.760 --> 0:07:59.640 if we get to a point where we are finally 0:07:59.720 --> 0:08:03.360 real opening and out of this stop start cycle, there's 0:08:03.360 --> 0:08:05.880 going to be still quite a bit of demand for energy. 0:08:05.960 --> 0:08:08.880 And then just think about the second derivative aspects of it. 0:08:08.920 --> 0:08:11.760 How many people have bought cars over the last year, 0:08:11.960 --> 0:08:15.000 how many people are dying to drive those cars to 0:08:15.160 --> 0:08:18.360 further destinations and and dying to get on airplanes and 0:08:18.360 --> 0:08:20.520 go to further places. So I think there's room for 0:08:20.640 --> 0:08:24.360 energy here. I would only caution investors that you don't 0:08:24.400 --> 0:08:26.840 want to see a ton of run up and energy 0:08:27.000 --> 0:08:30.400 to a point where it gets frosty or hits a spike, 0:08:30.760 --> 0:08:33.520 because when you get a spike in energy prices, very 0:08:33.520 --> 0:08:37.280 frequently a huge spike and energy is something that comes 0:08:37.320 --> 0:08:40.120 before a down draft in the economy. So we want 0:08:40.160 --> 0:08:43.680 to keep energy prices in control UM and I like 0:08:43.760 --> 0:08:45.800 to say things like I want them to take the stairs, 0:08:45.840 --> 0:08:48.680 not the elevator up by the way, another acronym that 0:08:48.720 --> 0:08:51.680 I hate as USP. But what is the unique selling 0:08:51.720 --> 0:08:56.040 point or what makes so Far different UM from other 0:08:56.200 --> 0:09:00.960 investment businesses. Well, so Far is an all in one 0:09:01.040 --> 0:09:03.680 app so it's not just an investment business. We have 0:09:04.240 --> 0:09:06.480 ways that people can save, we have ways that people 0:09:06.480 --> 0:09:08.680 can spend. We have a credit card, and then we 0:09:08.760 --> 0:09:12.360 have the invest platform that really offers our members a 0:09:12.440 --> 0:09:15.679 great way to invest and get started if they're new investors. 0:09:16.000 --> 0:09:19.040 It offers them a lot of different opportunities. You can 0:09:19.080 --> 0:09:20.800 buy I P O s on our platform, you can 0:09:20.840 --> 0:09:23.800 buy fractional shares on our platform, so there's a lot 0:09:23.880 --> 0:09:26.200 of great options. Crypto. You can buy a lot of 0:09:26.200 --> 0:09:29.600 crypto on our platform. But what what what's different about 0:09:29.679 --> 0:09:33.240 so far from say a robin Hood or a T 0:09:33.400 --> 0:09:35.800 dum merit trade or any of these other platforms that 0:09:37.040 --> 0:09:41.440 I guess younger investors are using to invest. Yeah, what's 0:09:41.440 --> 0:09:43.319 different about it is that we offer all of the 0:09:43.400 --> 0:09:46.120 solutions in one place. So a lot of the ones 0:09:46.160 --> 0:09:48.600 that are out there offering just an investing platform and 0:09:48.600 --> 0:09:50.400 you still have to do your banking somewhere else, in 0:09:50.440 --> 0:09:52.760 your credit card somewhere else, and you're lending somewhere else, 0:09:53.040 --> 0:09:56.000 and you can do every single one of them on ours, alright. 0:09:56.520 --> 0:09:58.360 I mean, we hear so much about it, and yes, 0:09:58.720 --> 0:10:01.800 it's gotten so popular that I just wanted to that's interesting. 0:10:01.880 --> 0:10:04.120 So you can do everything you don't need still a 0:10:04.160 --> 0:10:06.840 traditional bank account, you don't need to apply for a 0:10:06.840 --> 0:10:09.679 credit card elsewhere, and you can I guess use those 0:10:10.000 --> 0:10:14.040 uh services with each other, which probably it's got a 0:10:14.080 --> 0:10:16.640 market cap about ten billion dollars. Although the stock is 0:10:16.640 --> 0:10:21.080 off about prior twelve months after going public. I guess 0:10:21.080 --> 0:10:23.920 in October. All right, Liz, great to get a chance 0:10:23.960 --> 0:10:30.680 to talk to you. Let's talk about the office real 0:10:30.840 --> 0:10:33.120 estate space. Are people are gonna be coming back to 0:10:33.200 --> 0:10:36.160 the office. Do we need the companies and corporations need 0:10:36.200 --> 0:10:39.880 the space the footprint they had before the pandemic. I'm 0:10:39.880 --> 0:10:42.440 looking around here and I'm thinking the answer is noble 0:10:42.520 --> 0:10:46.760 or do they need more? Uh? Yeah, made for We're 0:10:46.800 --> 0:10:52.280 all sitting at these cubicles like little rat race rodents. 0:10:52.320 --> 0:10:56.080 You know, he's got four square feet like I would 0:10:56.160 --> 0:10:58.480 like some room to stretch out. My dad, by the way, 0:10:58.600 --> 0:11:00.920 had an office. I had at the door on it 0:11:01.280 --> 0:11:03.120 and you would go in there and he was the 0:11:03.160 --> 0:11:05.080 only person in there. You could close the door and 0:11:05.120 --> 0:11:08.880 have complete privacy. I had a table, a sofa like 0:11:08.920 --> 0:11:13.560 a little managing director at Credit Swiss First Boston. Those 0:11:13.600 --> 0:11:16.719 were the days, no Moss. Jeffrey Langbaum, Senior reat c 0:11:17.000 --> 0:11:20.360 R E equity analysts for Bloomberg Intelligence, joins us. Jeff. 0:11:20.400 --> 0:11:23.120 I keep seeing in the news companies in New York 0:11:23.160 --> 0:11:26.880 City and other urban areas continue the least space. Who's 0:11:26.880 --> 0:11:30.679 going to fill the space? I think the answer is 0:11:30.720 --> 0:11:33.080 somewhere in between what both of you are saying. Um, 0:11:33.720 --> 0:11:37.200 but people may not be back five days a week 0:11:37.320 --> 0:11:41.200 like we were before. UM, but companies are setting themselves 0:11:41.240 --> 0:11:44.560 up for a situation where people will be back some 0:11:45.120 --> 0:11:48.400 amount of time and they need space for that UM. 0:11:48.440 --> 0:11:52.320 And for each individual person, they might actually need more 0:11:52.360 --> 0:11:56.560 space than they needed previously. UM. What that means for 0:11:56.600 --> 0:11:59.360 the overall size of the footprint still remains to be seen. 0:11:59.760 --> 0:12:02.120 But the leases that we've that we're seeing getting done 0:12:02.160 --> 0:12:05.120 in many cases are actually for more space than what 0:12:05.160 --> 0:12:09.480 they had previously. So in terms of the return to work, 0:12:09.600 --> 0:12:11.960 we've had a couple of false starts here right especially 0:12:11.960 --> 0:12:15.440 on Wall Street, and everything seems to have gotten pushed back. 0:12:16.480 --> 0:12:22.079 You know, if you're a cool Stilicon Valley company, then forever. Um. 0:12:22.120 --> 0:12:26.079 If you're a conservative Wall Street bank, then like February 0:12:26.200 --> 0:12:29.160 fully boosted. Please, when are we going to see things 0:12:29.200 --> 0:12:33.080 get back to normal? Well, we'll see about that forever. 0:12:33.320 --> 0:12:35.920 I'm still skeptical about that. I think that most people 0:12:35.960 --> 0:12:38.000 are going to need to be in an office UM 0:12:38.640 --> 0:12:41.080 a portion of the time, whatever that may be, And 0:12:41.120 --> 0:12:43.360 I think the reason is that the companies want them 0:12:43.360 --> 0:12:48.800 there the people making these leasing decisions want their employees 0:12:49.240 --> 0:12:51.640 in person at least part of the time. UM and 0:12:51.640 --> 0:12:54.760 that's why leases are getting signed as far as when 0:12:54.840 --> 0:12:56.640 I mean, obviously, you know, every time there's going to 0:12:56.679 --> 0:12:59.520 be another spike of the virus is something that remains 0:12:59.640 --> 0:13:03.120 some amount of the normality going forward. You know, there's 0:13:03.120 --> 0:13:05.679 gonna be pauses and fits and starts. But I think 0:13:05.720 --> 0:13:09.040 at some point employers are going to want their employees back, 0:13:09.120 --> 0:13:11.240 and they're setting themselves up for when that's going to 0:13:11.320 --> 0:13:15.000 be um and and you know, we'll see how long 0:13:15.040 --> 0:13:19.040 it takes for it to get uh, you know, fully immersed. Jeff, 0:13:19.080 --> 0:13:21.720 how do you think about just across the country. You know, 0:13:21.760 --> 0:13:25.559 we we had this migration of people from urban centers 0:13:25.880 --> 0:13:30.199 fleeing to whether it's Florida or Texas or wherever Idaho falls. 0:13:30.400 --> 0:13:33.480 I mean, is that a long lasting thing? Are you 0:13:33.480 --> 0:13:36.400 seeing that in the vacancies and the rents or or 0:13:36.400 --> 0:13:38.360 do you still see a future for the urban centers. 0:13:39.440 --> 0:13:41.520 I still see the future for the urban center. I 0:13:41.559 --> 0:13:44.840 think that's where the the majority of the companies want 0:13:44.880 --> 0:13:49.280 to at least have their core, you know, central locations. 0:13:49.640 --> 0:13:51.320 You know, that's where the talent is that's where the 0:13:51.360 --> 0:13:53.960 young people want to be. I think for the most part, 0:13:54.200 --> 0:13:57.480 you're obviously seeing some corporate relocations. You're seeing some satellite 0:13:57.480 --> 0:14:00.520 offices opened, you know, throughout the South and you know, 0:14:00.679 --> 0:14:03.320 the South Florida the new hotbed. But but you're not 0:14:03.320 --> 0:14:07.040 seeing too many companies relocate in full force down there. 0:14:07.080 --> 0:14:09.520 And I don't think that that happens. Um. I think 0:14:09.520 --> 0:14:13.040 that you continue to have demand for places like New 0:14:13.080 --> 0:14:15.800 York and San Francisco, even if on the margin there 0:14:15.840 --> 0:14:20.640 are people migrating away from those cities. It's a bummer, dude. 0:14:20.640 --> 0:14:22.800 I was hoping you were going to say, look, obviously 0:14:22.800 --> 0:14:27.160 we're gonna keep New York, Chicago, Los Angeles, but let's 0:14:27.160 --> 0:14:29.440 spread out a little bit, like we are in the office, 0:14:29.560 --> 0:14:32.160 you know, Let's some of us go to Austin. Let's 0:14:32.200 --> 0:14:35.880 some of us go to like Taos. You know that. Uh, 0:14:35.920 --> 0:14:38.920 you know, I think I think some people are right, 0:14:38.920 --> 0:14:42.800 But it's not companies wholesale leaving for those locations. Yeah. No, 0:14:42.880 --> 0:14:44.920 that's what I thought. It would be cool. I mean, 0:14:45.200 --> 0:14:49.160 it would be cool if big companies, huge corporations would 0:14:49.200 --> 0:14:52.440 say we're leaving San Francisco, you know, and we're going 0:14:52.520 --> 0:14:55.320 to Myrtle Beach or whatever. Like. You know, we can 0:14:55.360 --> 0:14:59.440 communicate with everybody in the world easily and electronically. We 0:14:59.480 --> 0:15:02.600 don't need to be down the street. So but that's 0:15:02.640 --> 0:15:06.360 just one of my pipe dreams. I want population centers 0:15:06.400 --> 0:15:08.880 just to spread out. I think we're too dense really. 0:15:10.200 --> 0:15:13.160 All right, well, Jeff's first, how about in New York City, 0:15:13.200 --> 0:15:15.080 what's just give us delay of the land in commercial 0:15:15.080 --> 0:15:19.440 real estate in New York City, Well, office leasing in 0:15:19.480 --> 0:15:22.840 the fourth quarter was the highest that has been since 0:15:22.920 --> 0:15:25.720 the fourth quarter of two thousand nineteen. Has been a 0:15:25.760 --> 0:15:29.680 steady uptick. Now we're still below pre pandemic levels, right, 0:15:29.720 --> 0:15:31.600 the amount of LEAs is being signed is still below 0:15:31.600 --> 0:15:35.920 pre pandemic levels, and vacancy is elevated. Um rents are 0:15:35.960 --> 0:15:40.040 falling because the vacancy is elevated. But what is really happening, 0:15:40.040 --> 0:15:44.440 I think, is the a migration of tenants to higher 0:15:44.480 --> 0:15:48.560 quality buildings. There's going to be a bifurcation the newer 0:15:49.040 --> 0:15:52.200 and more recently renovated buildings with the highest amenities in 0:15:52.280 --> 0:15:54.200 the best locations. Those are going to be the ones 0:15:54.240 --> 0:15:57.479 that attract pennants and keep occupancy high and rent high, 0:15:57.600 --> 0:15:59.760 and those that are on the opposite end of the spectrum, 0:15:59.760 --> 0:16:03.080 are really going to suffer and potentially you know, become 0:16:03.080 --> 0:16:05.400 obsolete as office buildings and need to find some other 0:16:05.720 --> 0:16:07.960 other use. And so I think that that will naturally, 0:16:08.000 --> 0:16:12.280 over time reduce the amount of space um uh, you know, 0:16:12.400 --> 0:16:15.640 overall available space, and get us back more towards a 0:16:15.680 --> 0:16:19.240 period uh a position of equilibrium. All right, Jeff, thanks 0:16:19.240 --> 0:16:22.240 so much for joining us. Always appreciating your thoughts on 0:16:22.400 --> 0:16:25.080 the real estate space. Jeff Langbaum, He's a senior read 0:16:25.120 --> 0:16:28.720 analyst for Bloomberg Intelligence. He's been doing this for decades, 0:16:29.440 --> 0:16:31.320 but he used to do it from the office. Yeah, 0:16:31.360 --> 0:16:34.360 and I working from home today. And we'll see how 0:16:34.400 --> 0:16:37.320 long that lasts here at Bloomberg LP. I get a 0:16:37.320 --> 0:16:39.600 sense that we'll be coming back to the office at 0:16:39.600 --> 0:16:41.720 some point and not too distant future. We'll see how 0:16:41.760 --> 0:16:44.800 that plays out. Every corporation seems to be uh kind 0:16:44.800 --> 0:16:51.560 of dealing with that as well. So many industries have 0:16:51.680 --> 0:16:55.800 been disrupted by this pandemic, by the economic disruption. One 0:16:55.840 --> 0:16:59.760 of them is just broadly defined transportation, but particularly aviation, 0:16:59.840 --> 0:17:01.960 and who wants to hop in an aircraft with two 0:17:02.440 --> 0:17:05.680 yr you know, potentially infected people that's been a real 0:17:05.840 --> 0:17:08.240 issue for the industry, and one of the results is 0:17:08.400 --> 0:17:12.560 private aircraft travel has actually picked up during the pandemic. 0:17:12.600 --> 0:17:15.760 We want to get some more color on that. Tal Kanan, 0:17:16.040 --> 0:17:18.800 CEO of sky Harbor Group, joins us Talent, thanks so 0:17:18.880 --> 0:17:21.600 much for taking that time here. Just briefly, let's start 0:17:21.600 --> 0:17:23.960 off at just saying what is sky Harbor. What do 0:17:24.000 --> 0:17:27.399 you guys do within the aviation space? Well, thanks for 0:17:27.440 --> 0:17:31.040 having me conceptual Our business very simple. We we secure 0:17:31.160 --> 0:17:34.200 land at airports across the United States. These are mainly 0:17:34.280 --> 0:17:38.840 airports and supports business aviation. We developed campuses of hangars 0:17:38.880 --> 0:17:41.880 for business aviation and then least them out long term 0:17:41.920 --> 0:17:45.879 to corporate or individual tenants and manage them. That's good business. 0:17:47.080 --> 0:17:52.480 And how did you I mean, you come from impressive 0:17:52.600 --> 0:17:56.840 education and you are a fighter pilot yourself. Um, what's 0:17:56.880 --> 0:17:59.920 your idea for this business that differentiates it from other 0:18:00.000 --> 0:18:04.280 businesses in the space. Yeah, so a couple of things. First, 0:18:04.320 --> 0:18:06.439 I think it's it's a non controversial statement. There is 0:18:06.640 --> 0:18:10.520 massive unmet demand for hangar space in business aviation across 0:18:10.560 --> 0:18:13.240 the United States. And you know, just to kind of 0:18:13.240 --> 0:18:15.879 give you a sense, put some numbers on it. Uh, 0:18:16.000 --> 0:18:20.040 the square footage of the US business aviation fleet grew 0:18:20.160 --> 0:18:23.040 by twenty seven and a half million square feet between 0:18:23.040 --> 0:18:26.000 two thousand and two thousand and twenty. Now what's happened 0:18:26.040 --> 0:18:29.359 in the last two years is just a very very 0:18:29.440 --> 0:18:32.320 dramatic acceleration of that trend. You know, what we have 0:18:32.480 --> 0:18:35.960 now is a situation where the vast majority you probably close, 0:18:37.280 --> 0:18:39.720 of those who can afford private air travel in the 0:18:39.800 --> 0:18:43.960 United States. I'm talking about both corporations and individuals UH 0:18:44.119 --> 0:18:47.600 close to have not availed themselves of private aviation. And 0:18:47.640 --> 0:18:49.560 what we're seeing right now, and I think your introduction 0:18:49.600 --> 0:18:52.600 was very appropriate, appropriate on that we're seeing right now 0:18:52.800 --> 0:18:56.040 is just a you know, the whole scale migration from 0:18:56.080 --> 0:18:59.520 commercial aviation into private among those. By the way, why 0:18:59.640 --> 0:19:01.679 haven't day I mean, is it just not prudent to 0:19:01.720 --> 0:19:05.280 spend your money that way? Tal It seems like the 0:19:05.480 --> 0:19:09.080 jump from business class to your own jet is quite 0:19:09.080 --> 0:19:13.639 a bit. Yeah, I mean, for it is expensive. I 0:19:13.640 --> 0:19:15.800 think culturally a lot of things, a lot of people, 0:19:15.840 --> 0:19:18.560 a lot of corporations haven't like that look for a 0:19:18.560 --> 0:19:22.320 long time, but increasingly that is a responsible thing to do, 0:19:22.400 --> 0:19:24.479 especially for a business. You know, that involves a lot 0:19:24.520 --> 0:19:28.080 of travel and sending people on kind of extended road 0:19:28.119 --> 0:19:32.359 trips today using commercial travel is disruptive. And you know, 0:19:32.359 --> 0:19:33.840 one of the things you'll see it's it's not just 0:19:34.160 --> 0:19:38.560 it's not just the risk of contracting COVID nineteen on 0:19:38.600 --> 0:19:42.960 a commercial flight, it's the airline's reaction to COVID, which 0:19:43.000 --> 0:19:46.560 has largely been to cancel and diminish a lot of routes. 0:19:46.720 --> 0:19:49.399 So getting from secondary city to secondary city in the 0:19:49.480 --> 0:19:52.359 United States today is much more difficult than it was 0:19:52.400 --> 0:19:54.280 two years ago, and I think that's probably going to 0:19:54.320 --> 0:19:57.199 be the case for a while. Talent, how do you 0:19:57.240 --> 0:20:00.560 think business travel is going to return? And we've seen 0:20:00.920 --> 0:20:04.439 generally leisure travel come back depending upon where we are 0:20:04.520 --> 0:20:08.080 with with the various variants, but business travels something different. 0:20:08.080 --> 0:20:11.040 How do you think about it? Well, so a couple 0:20:11.080 --> 0:20:14.080 of things. First, in much of the country it already 0:20:14.080 --> 0:20:16.040 has returned. And then some you know, if we look 0:20:16.080 --> 0:20:18.679 at kind of our facility in Miami, we look at 0:20:18.720 --> 0:20:22.800 the fuel volumes that fuel consumption by business aviation. We're 0:20:22.840 --> 0:20:26.520 hitting record years. If you see delivery of new aircraft 0:20:27.880 --> 0:20:31.280 was a record year. Delivery of new business aircraft two 0:20:31.359 --> 0:20:35.359 is going to beat it. About twelve, so the market 0:20:35.440 --> 0:20:38.600 is already speaking on this. You know, the the this, 0:20:38.600 --> 0:20:41.520 this business aviation fleet in the United States will continue 0:20:41.520 --> 0:20:44.320 to expand by literally millions of square feet per year, 0:20:45.480 --> 0:20:47.720 I think for the foreseeable future. And I think one 0:20:47.760 --> 0:20:51.240 of the things that's worth looking at. Historically, the move 0:20:51.400 --> 0:20:56.000 from commercial to business aviation has tended to be secular. 0:20:56.119 --> 0:20:58.399 You know. On once a company decides it's going to 0:20:58.480 --> 0:21:02.040 start flying privately, it tends to go back to commercial aviation. 0:21:02.400 --> 0:21:07.040 So we we think you can't go back. I will 0:21:07.080 --> 0:21:10.000 tell you I a good friend of mine as a CEO, 0:21:10.520 --> 0:21:13.160 was a CEO of Major Carmaker, and after he retired, 0:21:13.160 --> 0:21:15.440 his family made him take one trip on a commercial 0:21:15.480 --> 0:21:17.760 flight and he said, man, I never want to do 0:21:17.800 --> 0:21:21.160 that again. Awful, awful explorence um and it is bad. 0:21:21.320 --> 0:21:23.720 You know. They sit you right on top of each other. 0:21:23.800 --> 0:21:26.200 They don't care about the risk of COVID. They will 0:21:26.240 --> 0:21:30.240 they they will put you less than a safe social 0:21:30.280 --> 0:21:33.160 distance apartment in the plane and on the bus. And 0:21:33.480 --> 0:21:35.720 tell I want to ask about Miami as a choice. 0:21:35.720 --> 0:21:38.840 I believe you're from Miami, but I know you studied 0:21:38.880 --> 0:21:43.920 at Georgetown and then in the Northeast You've advised government 0:21:44.000 --> 0:21:49.159 task forces in Israel where you served in the military, 0:21:49.280 --> 0:21:52.800 so you've been around. Why go back to your roots. 0:21:52.800 --> 0:21:56.440 Why choose Miami as a place to headquarter your company? Well, 0:21:56.640 --> 0:22:00.280 so it's it's it's only one of our facilities right now. Yeah, 0:22:00.280 --> 0:22:02.640 we've been six facilities today. The company is actually headquartered 0:22:02.680 --> 0:22:05.000 in New York. I will say it is one of 0:22:05.000 --> 0:22:07.879 my favorites. And then you know, the just business growth 0:22:07.880 --> 0:22:10.000