(Bloomberg Opinion)—Defined-benefit pension plans were already barely treading water heading into 2020. In the years ahead, the risk is as great as ever that a large swath of them will drown.
As the name implies, defined-benefit pensions promise to pay a set amount to retirees. While corporate America has largely moved away from this structure in favor of 401(k) options (or “defined contribution” plans), virtually all state and local governments still offer these reliable retirement payouts. And they’ve been falling behind in a big way: In the 2019 fiscal year, states had $1.48 trillion in unfunded pension liabilities, while the 50 largest local governments faced $478 billion in adjusted net pension liabilities, according to calculations from Moody’s Investors Service. The 100 largest corporate defined-benefit plans had a deficit of $285 billion in November, according to Milliman data.
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It will come as no surprise that 2020 was a time of worry, woe and wishful thinking for the vast majority of businesses related to commercial real estate.
But for certain sectors of the industry, it was a particularly fraught year to launch new products and projects, and all five of our biggest flops this year fell prey to withering market conditions or a tense political climate. Check out our list of this year’s major stumbles.
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The empty swaths of parking decks and garages during the coronavirus pandemic in commercial properties are more than just evidence that working from home has killed traffic into office buildings, hotels and retail properties.
Those empty garages have huge financial implications on the commercial parking industry. Their operators are facing a financial crisis, laying off thousands of workers, and building owners stuck with unused garages are losing millions and wondering if they should repurpose the space.
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After the most tumultuous year in memory, commercial real estate executives are cautiously upbeat about prospects for the industry in general and investment in particular, according to the results of the latest CPE 100 Sentiment Survey.
In a show of optimism that things are looking up after a long, difficult stretch, 92 percent of the CPE 100 predict that the commercial real estate market’s health will be somewhat better in six months. At midyear, that figure stood at only 63 percent, while 32 percent expected the health of the commercial real estate market would be worse in six months. In the year’s initial Sentiment Survey last February, executives believed the market would be unchanged by a 62 percent majority. The findings are based on a quarterly survey of the CPE 100, an invited group of industry leaders.
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Driven by a combination of continued remote working, workforce reduction and economic uncertainty, it’s not surprising that 80 percent of markets tracked by real estate services firm Transwestern have reported an increase in sublet office space in recent months.
“Nationally, the sublease availability rate is 0.9 percent or 163 million sq. ft., as of third quarter 2020, which is comparable to the 0.8 percent (of total available inventory) or at 137 million sq. ft. reached during the 2009 recession,” notes Elizabeth Norton, senior managing director of research services with Transwestern.
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Though it runs contrary to the narrative of declining leasing activity in the wake of the coronavirus pandemic, lease renewal data shows that the square footage leased grew by 2.2% from pre-renewal sizes during the second and third quarters of 2020, according to Cushman & Wakefield research. But, don’t mark it down to social distancing.
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With more than 10,000 Americans reaching retirement age every day, pension funds are coming under increasing pressure to maximize returns and generate steady income to meet their growing financial obligations to America’s retirees. For pension funds working to meet this challenge, effective asset allocation is vitally important. But a recently updated study by pension research firm CEM Benchmarking, sponsored by Nareit, shows that, in their real estate asset allocations, these investment professionals and their consultants could be making better choices to boost their returns.
The study examines the asset allocations and investment performance of 200 public and private U.S. pension funds representing nearly $3.9 trillion in combined assets under management. It provides a comprehensive review of investment allocations and actual investment performance across 12 asset groups over a 21-year period, 1998-2018.
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Apartment investors are in a hurry to make up for lost time. They are trading billions of dollars in apartment properties—a pace of activity that’s double or even triple the volume of sales from the fall.
Buyers and sellers have closed deals despite the coronavirus pandemic worsening in the U.S., with hundreds of thousands of new cases confirmed daily and the death toll now reaching more than 3,000 in a single day twice this week.
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The last 280 days of the cornavirus pandemic have been unprecedented, unimaginable and tragic in countless ways. From an economic perspective, where we work, where we eat, where we shop — where we do anything — is still mostly in flux. It’s anyone’s guess what will come back stronger, or perhaps not at all. At every level of real estate and the global economy, people and companies are suffering.
But as a vaccine starts to be distributed, things could start to turn around, and businesses are looking at how their strategy should be different in the new year.
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COVID-19 has thrown a huge curveball at the office leasing market, which was already adjusting to some radical new realities. Leases are shorter, users want more flexibility, and amenities often drive deals. The better the food options, the conference space, the opportunities for recreation and fitness, accommodations for pets and bicycle riders, the more likely the lease.
Toss in coronavirus, and the world becomes an even more radically different place. Now, landlords have to figure out whether demand for six feet between bodies is a secular or cyclical development, likely to be forgotten in a couple of years when COVID is a memory. And, they have to figure out what amenities will appeal to tenants in a post-COVID world. A lot of people remember how, post-9/11, companies didn’t want to be on a high floor, but years later, high floors were in demand
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There are several contributing authors here.