A weekend topic starting with Market Watch. "Commercial real estate’s COVID-19 woes can’t be patched up with more debt. That’s Lisa Pendergast, executive director of the CRE Finance Council, an industry group focused on the $4.6 trillion commercial real estate finance market, on the pile of problems confronting properties as a result of the coronavirus pandemic. In June, the delinquency rate for property loans that were bundled into commercial mortgage-backed securities deals hit a near all-time high of 10.3%, a jump from only 2.8% a year prior, according to Trepp."

"'The numbers are truly eye popping,' Pendergast said of the rapid pace of building owners falling behind of their mortgages. During the global financial crisis it 'was kind of a rolling disaster that was slower to materialize,' she said, speaking of the distress that eventually hit commercial properties a decade ago. 'Here, it was overnight.'"

The Denver Post in Colorado. "When the coronavirus hit, Denver was coming off the biggest years for new apartment construction in its history. Developers completed more than 26,000 apartments in the Mile High metro over the last two years, including a record 13,300 in 2018, according to data from Denver-based data firm Apartment Insights. The year represents the crest in a surge in apartment development dating back to at least 2015."

"Now that the decade-long economic expansion that helped fuel the boom has come to an abrupt end, apartment developers — in Denver and across the country — find themselves at a crossroads. Coronavirus has visited some short-term pain on the city’s apartment market. Kairoi Residential’s new Park 17 apartment building near the intersection of East 17th and Park avenues is about 12% leased so far."

"Vacancy rates went up, rents came down and new units stayed empty for longer. Denver’s core downtown neighborhoods were hit the hardest. 'People opening their doors over the next six months or a year, they are probably going to have suffer some slow absorption, probably are going to have to offer more concessions than they planned on,' said Scott Rathbun, a consultant with Apartment Insights."

From Bisnow on New York. "The city is closing down streets to allow for more outdoor dining space, but Melissa Fleischut, the president and chief executive of the New York State Restaurant Association, told The New York Times this week that it needs to be expanded. 'I don’t know anybody who would have the capacity outdoors that they have indoors,' she said to the publication. 'The sales are just not anywhere where they need to be to make restaurants profitable.'"

"'I have these arguments with the landlord: We have no ability to operate in some places, and I say, ‘How can you ask me to pay rent?' said Nicholas Stone, the founder of Australian coffee chain Bluestone Lane. They go, ‘it’s not my problem.’ Well, asset prices have gone up so much in the last five or 10 years, it’s time now for everyone to share the pain.'"

From Marketplace. "The rent in places like New York and San Francisco is, to use a technical term, insane. The average rent for a one bedroom in New York is $4,208 according to one estimate. Will that change? Yuri Pinter lives in a 'convertible two bedroom' on the fourth floor of a walk-up in Hell’s Kitchen. That means it was built as a one bedroom, but a partial wall has been constructed to convert the living room into a second bedroom. There is no living room. This is a fairly common way of life in New York."

"The rent is $2,500 a month. Pinter asked for a break. 'I sent them an email and I asked for 50% off actually, I asked for half price.' The landlord was accommodating. 'He said, we can’t do fifty percent but we’ll do 25%.'"

"Pinter is wondering if he’s going to stay. 'It’s not worth it, New York City rent is not worth it. Cause we’re paying for the lifestyle, we’re paying for the city, we’re paying for the life outside of the apartment, otherwise it makes no financial sense.' How many Yuris are out there, that’s what’s gonna determine the rent. Because the rent is, in the end, just a measure of how much people want to be here."

The San Francisco Chronicle in California. "One-bedroom rents fell compared to the prior year in 27 of 31 Bay Area cities tracked by Zumper, a real estate listings website. The biggest drops were concentrated in major Silicon Valley tech hubs, including Cupertino and Menlo Park. Those cities have some of the region’s highest rents. 'People are definitely taking this time to move out of San Francisco,' said Crystal Chen, marketing manager at Zumper."

"The number of listings have risen about 25% in San Francisco compared to the previous year, meaning renters have more options. Chen said her friends have successfully renegotiated rent to a lower rate and she urges prospective tenants to push for lower rents and more incentives, which can include gift cards or free parking."

"'I was expecting a significant drop in rents and a big jump in vacancy rates. Unemployment hits the rental market much harder than it hits the for-sale market,' said Patrick Carlisle, chief market analyst in the Bay Area at real estate brokerage Compass. 'Tenants paying the highest rents in the nation decamp quickly if their jobs disappear — to cheaper areas or back to mom and dad — and that is what is happening now.'"

From KPBS in California. "The San Diego City Council voted narrowly Tuesday to extend a citywide moratorium on evictions through September 30. Unemployment in some low-income San Diego neighborhoods has been hovering around 25%. Councilmembers Barbara Bry, Mark Kersey, Chris Cate and Scott Sherman voted against the measure, citing concerns that landlords would be unable to pay mortgages or maintain their properties if they are forbidden from kicking out tenants who aren't paying rent."

"'I understand and sympathize with the challenges many of our residents are facing,' Bry said. 'But today we are being asked to vote to extend an eviction ordinance that doesn't really solve the problem.'"

The Houston Chronicle in Texas. "Houston hotels are not expected to return to pre-pandemic revenue levels until 2024, according to commercial real estate firm CBRE. Some may not make it that long. The American Hotel and Lodging Association this week predicted the industry is facing 'massive foreclosures of thousands of hotel properties' across the nation."

"'With a sharp decline in travel demand, nine times worse than September 11 and with lower room occupancy than during the Great Depression, our small business owners are struggling to survive,' Chip Rogers, the association’s chief executive, said in the release."

"At special risk are hotels that were funded with mortgages that were bundled into securities, known as commercial mortgage-backed securities, or CMBS. Commercial real estate investors are confronting issues similar to those faced by investors in residential real estate mortgages in the years leading up to the housing bust of more than a decade ago. As with homes, most commercial properties are purchased with mortgages, which are then bundled into securities and sold to investors, whose returns depend on property owners making their monthly payments."

"One-quarter of securitized hotel mortgages were delinquent in June, data from securities data company Trepp show. But hotel owners who are struggling to make monthly payments are finding much less flexibility if their mortgages have been securitized, according to a survey by the hotel association."

"Only 20 percent of hotel owners whose mortgages had been bundled into securities have received any relief on their loans, compared to 91 percent of hotel owners who had borrowed from banks, making it more likely for such mortgages to foreclose, Rogers said. 'Without action to shore up commercial debt especially CMBS loans, the hotel industry will experience mass foreclosures and permanent job losses which will snowball into a larger commercial real estate crisis impacting other segments of the economy.'"

The South Florida Business Journal. "The nation's months-long struggle to regain its economic footing amid the Covid-19 pandemic is stretching consumers to a breaking point, with the latest signs of distress flaring in the U.S. apartment market. South Florida, which had a relatively healthy rental marketing before the recession, has not been spared."

"A Business Journals analysis of construction and mortgage data identified a significant pullback in multifamily building permits and building starts since February. The retrenchment foreshadowed pain and, in some circles, opportunities to come, as property owners from Florida to California have since reported surges in missed rents and requests for relief among tenants affected by the country's record spike in unemployment."

"As of June 15, the Business Journals identified 4,966 multifamily properties flagged by loan servicers for issues threatening their operations and financial health, a 46% increase over the 3,403 given the same 'watchlist' status in March. While concerns ranged from low occupancy levels to maintenance needs, the vast majority of issues cited among the newly minted watchlist properties were related to Covid-19, according to dozens of loan servicer notes reviewed for this story."

"The increase in distressed loans was concentrated in major cities with large apartment markets. Among the five areas with the most multifamily units analyzed, New York City and Los Angeles both saw a 59% increase in watchlisted apartment properties from March to June. Spikes also were reported in Houston (68%), Dallas (41%) and Washington, D.C. (70%)."

"In South Florida, the number of loans on the watch list increased from 31 with a balance of $334 million to 98 with a balance of $794 million. Perhaps even more troubling, more multifamily loans in South Florida were flagged by special servicers as being late or in default."

"As of May 31, there were approximately 106 million consumer-credit accounts — ranging from auto loans to student debt to home mortgages and credit cards — in some stage of remediation with lenders. That was more than triple from a month earlier, according to credit-research concern TransUnion LLC."

"Similar signs of stress are appearing in loan-servicer reports for major apartment properties throughout the country. At the sprawling ParkMerced development at 3711 19th Ave. in San Francisco, owner Maximus Properties recently warned its loan servicer of potential cashflow concerns due to the Covid-19 pandemic. The property backs approximately $1.26 billion in mortgage debt."