The Bisnow Weekender: Why Is CRE Leaving Green On The Table?
Thanks for reading the Bisnow Weekender, my personally curated roundup of the most impactful news, notable quotes, binge-worthy show recommendations and other colorful highlights from the Bisnow world of commercial real estate and beyond.
Save the planet and make money along the way?
The hard-nosed world of commercial real estate doesn’t run on morality — it runs on a different kind of green — but even when those shades of green match, the answer is a collective heave of … “nah.”
In a multi-part Bisnow special report published this week, we spotlight the underutilized potential of green loans within the real estate sector. As New York Reporter Ciara Long uncovers in her story, despite the dual benefits of helping the environment and securing cheaper debt, hesitancy among lenders and borrowers remains high, stifling wider adoption.
“If you want to put a number on it, guilt's worth a quarter point on interest on a loan. That's it. That's guilt,” one expert told us. “Anything beyond that, it's got to be something that can flow down to the bottom line. Right now, that's not matching up.”
In the second part of this series, Houston Reporter Maddy McCarty reports how real estate lenders are still missing significant opportunities to enforce carbon reduction measures among borrowers. It’s more of the same, which was perfectly illustrated in the big takeaway from our investigation last year led by UK Editor Mike Phillips:
“Almost half of the world’s largest real estate investors, which between them own or control more than £1T ($1.2T) of property, have no target to reduce the carbon emissions from their portfolios. Real estate is responsible for 40% of global greenhouse gas emissions, but a Bisnow analysis of real estate’s 75 largest institutional investors, listed companies and investment managers found that 32 have no overall plan to reduce the amount of carbon they put into the atmosphere.”
Part three in the series drops on Monday night and will say essentially the same thing as the above: There has been zero improvement year-over-year.
Switching gears, National Reporter Dees Stribling brings us into the topsy-turvy world of office leases. As massive expirations loom, tenants find themselves wielding unprecedented leverage, capable of dictating terms that could reshape the financial landscape for landlords for years to come.
“What we're seeing now, in the last 24 months, I've never seen before,” a tenant rep told us. “There were times when tenants had the upper hand, but it's not like this.”
Additionally, we continue to follow the troubled trajectory of WeWork as it reveals post-bankruptcy financial projections amidst a significant reduction in locations. At this point, the coworking giant's survival strategy and impact on landlords and tenants is undoubtedly beginning to influence the broader market.
Congratulations to Don Tepman aka StripMallGuy and Bob Knakal on another successful Real Estate X Gala last night in New York City. It was great to be in the room — 101 floors above the Hudson River! — with so many of the people who live and breathe #ReTwit.
And everyone said social media was a waste of time?
— Mark F. Bonner, Bisnow Editor-in-Chief
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Voices From The CRE Battlefield
Q1 Press Conference pic.twitter.com/hhHvfo4O0q
— KyleMatthewsCEO (@kylematthewsceo) April 22, 2024
— StripMallGuy (@realEstateTrent) April 21, 2024
Most insufferable man I matched with on Hinge was a middle-aged CRE guy.
— Allyson Taft (@AllyTaft) April 22, 2024
Asked him to let me know the make and model of his car so I could have a guest parking pass preemptively printed for him. (We were meeting at my place and walking to a spot in midtown for drinks.)
He says,…
The Best Of Bisnow News: April 22-26
SPECIAL REPORT: In The Bare-Knuckle World Of Real Estate, Green Loans Are Losing The Fight — New York Reporter Ciara Long
Save the planet, and get cheaper debt, too. It should be the ultimate win-win.
Green loans are a tool that could help the commercial real estate sector dramatically reduce its huge carbon output, theoretically providing a way for lenders to make money by helping borrowers decarbonize their real estate portfolios.
But commercial real estate lenders and borrowers remain hesitant to engage with green lending. Just over half of the largest lenders to the industry globally offered some form of green lending program, an ongoing Bisnow investigation into real estate’s claims around carbon reduction found.
Even as green lending to global economies has soared in the past five years, it remains infrequently used in real estate.
Debt providers have yet to be convinced that green lending can yield the same returns as traditional lending, while borrowers are hesitant to jump through additional hoops to get financing, industry figures said.
PART 2 OF THIS SPECIAL REPORT SERIES: Real Estate Lenders Are Missing The Chance To Make Borrowers Cut Carbon — Houston Reporter Maddy McCarty
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'I Thought It Was A Mistake': Office Lease Expirations Are Lining Up, With Tenants In Driver's Seat — National Reporter Dees Stribling
It’s an office tenant’s world. Everyone else is just living in it.
On the heels of four years of hard times for office owners, a new wave of lease expirations is on its way. Tenants have leverage like never before as they negotiate the leases that will influence landlords’ balance sheets for years to come.
About 217M SF of office leases are set to expire this year or in 2025, according to Cred iQ, with another 202M SF expiring in 2026 and 2027, based on its analysis of office properties financed by CMBS, which means the total will be greater.
This reality, coupled with historic office availability, means some truly remarkable negotiations for tenants that are scoring lower rents and more favorable lease terms.
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WeWork Reveals Post-Bankruptcy Financial Projections As Landlords Say Restructuring Close To 'Meltdown' — New York Reporter Sasha Jones
The coworking giant's projections, filed in bankruptcy court Tuesday, show the company plans to exit bankruptcy with 337 locations, including 178 offices across 38 cities in the U.S. and Canada.
This is a massive reduction from the 850 locations it operated at its 2019 peak.
WeWork also stated that it could have as much as $443M in administrative claims, including unpaid postpetition rent that the company has withheld.
However, WeWork projected that it will hit profitability next year, with a net income of $101M. It estimates that it will lose $15M between June and December as it continues efforts to bring down costs.
More Big News From The Week …
— CoStar To Acquire Proptech Company Matterport In $1.6B Deal
— Apartment Starts Fall 43% From 2023
— ACORE Capital Closes $1.4B CRE Debt Fund, Largest So Far This Year
— 'Best Buying Cycle' In IOS Real Estate Is Here, Primed By Values At Ports And Inland Growth
My Slightly On/Off-Topic Media Diet
U.S. Growth Slowed In First Quarter, But Inflation Remained A Bug (NYT):“Economists were largely unconcerned by the slowdown, which stemmed mostly from big shifts in business inventories and international trade, components that often swing wildly from one quarter to the next. Measures of underlying demand were significantly stronger, offering no hint of the recession that forecasters spent much of last year warning was on the way. … But the solid growth figures were accompanied by an unexpectedly rapid acceleration in inflation. … At a minimum, stubborn inflation is likely to mean that the Fed will wait at least until fall to begin cutting interest rates.”
America’s Economy Is No. 1. That Means Trouble. (WSJ): “Through February, Biden had canceled $138 billion in student debt — and he has just unveiled plans to erase billions more — which directly boosts debtors’ purchasing power. Of the $95 billion in aid to Ukraine, Taiwan and Israel just approved by Congress, $57 billion will flow back to U.S. producers in the form of more weapons purchases. It’s one reason inflation, though down from a year ago, has stalled above the Federal Reserve’s 2% target. The IMF thinks core inflation (which excludes food and energy) is a half percentage point higher than otherwise would be because of fiscal policy. This, in turn, is keeping the Fed from cutting short-term interest rates.”
Why Americans Won't Do The One Thing That Would Bring Down High Prices (Business Insider): “Why are we willing to spend through the pain? According to experts I talked to, the surge in hate spending can be attributed to various factors. For one thing, a lot of people still have the financial stability necessary to open their wallets. On a psychological level, many consumers are just throwing up their hands at the state of financial affairs. They're aware prices aren't going back to 2019 levels, and given everything everyone's just been through, they may as well live it up.”
Reversing the Real-Estate Doom Loop Is Possible. Just Look at Detroit. (WSJ): “Barely a decade after Detroit declared bankruptcy, the city is emerging as America’s most unlikely real-estate boomtown.”
What Happens After Your Country Runs On 99 Percent Renewable Electricity? (The Verge): “While most of the world still runs on dirty fossil fuels, Costa Rica has generated nearly all of its electricity from renewable sources of energy for nearly a decade. … It’s still not enough.”
Compassion Is Making A Comeback In America (Vox): “Researchers chronicled a ‘pandemic of kindness,’ as donations to charity and volunteering increased in the face of COVID-19. … But we might ask another question: Will people react to this good news as strongly as they did to the bad news that preceded it? Human beings pay more attention to negative news compared to positive events. This makes evolutionary sense: It’s safe to ignore a sunset, but not a tsunami. But a bias toward badness can also give us the wrong idea about our world and the people in it. We judge people more readily based on the worst things they’ve done, rather than their best, and routinely underestimate how kind, caring, and open-minded others are.”
Bisnow Weekend Interview Preview
The Weekend Interview features a wide-ranging conversation with Airbnb Global Head of Real Estate Jesse Stein, who sat down with Bisnow Senior New York City Reporter Sasha Jones.
The pair discussed Stein's former ambitions of being a fighter pilot, getting cut in training camp from the NFL's Jacksonville Jaguars and how he has navigated Airbnb's real estate strategy through a pandemic, an IPO and a bumpy environment for the high-growth startup darlings of the 2010s.
Bisnow: You joined in 2020 with the world changing and hospitality changing. Can you walk me through how you made that shift, how you rode those waves, especially early on in your time at Airbnb?
Stein: It was interesting because it was a shock. I left a really great group of folks that I really loved. I loved what I was doing personally over there. It was fun to kind of take a flier — I know it sounds insane now, but take a flier — on Airbnb, which was not public at that point in time, still not what it is today, not a noun and a verb, and lead a new group. And then all of a sudden, within my first month of joining, Covid hits and our business goes down 80%. And everything that I thought I was brought in to do kind of changed.
Bisnow: Did you think of it as, like, a bad omen? I don't know how superstitious you are, but...
Stein: I'm a big believer in things happen for a reason, and you shouldn't worry about the things you can't control. You have to make some bets in life. I didn't view it as a bad omen, I viewed it as another curveball. Everybody's knocked off the horse right now. We're not in this by ourselves. And how do we make lemonade out of lemons? I think one of the things Covid really brought upon Airbnb is focus.
The Weekend Interview goes live every Friday evening — head to www.bisnow.com over the weekend to check it out!
Jobs! Jobs! Jobs!
Here are this week’s top jobs over at Bisnow's careers platform, SelectLeaders. Reach out to SelectLeaders Managing Director Ryan Neale to learn more. You can email him at ryan.neale@bisnow.com.
Senior Vice President — Lead strategic planning to maximize the performance and value of a substantial CRE investment portfolio.
Chief Financial Officer — Oversee all aspects of financial operations, with a focus on supporting commercial real estate acquisitions and investment.
Managing Director — Oversee the planning and execution of Harvard's project portfolio, project delivery standards, controls and resources.
Vice President of Construction — Lead construction strategy, policies, processes and standards for a preeminent national owner, operator and developer of shopping centers.
Hey, Emily, What Are You Going To Binge This Weekend?
I’m on a Modern Family kick right now. It’s one of my favorite shows because it never fails to make me laugh. I think the casting is perfect, and watching all of the characters interact hilariously in real-life situations is priceless. I love all of the characters, but if I had to choose a favorite, I’d choose either Cam or Gloria. I’ve been told that I should watch Drops of God and Daisy Jones & The Six, but I haven’t gotten around to those yet (even though I know I should!). I’m also excited for the newest seasons of Bridgerton, and of course Outer Banks, to come out soon on Netflix!
— Emily DeNardo, Senior Writer for Studio B
Upcoming Bisnow Events And Webinars
Monday, April 29 to Wednesday, May 1 (Nashville): Elevate
Tuesday, April 30 (Austin): Austin Bisnow Multifamily Annual Conference (BMAC)
Tuesday, April 30 (Digital): Q2 Retail Check-In: A Location Analytics Perspective
Wednesday, May 1 (Dallas): Future of Downtown and South Dallas
Thursday, May 2 (McLean, Virginia): Future of Tysons
Thursday, May 2 (Los Angeles): Southern California Industrial Conference
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How did I do? You can send all love letters and dissents directly to me at mark.bonner@bisnow.com.
