JLL CEO, Markets, U.S. & Canada John Gates joins Yahoo Finance’s On The Move panel to discuss how commercial real estate has been impacted by the pandemic.
ADAM SHAPIRO: And welcome back to Yahoo Finance "On The Move." We talk a lot about real estate, whether people are leaving big cities, whether there is going to be a loss of value in residential or commercial real estate. And some of the best people to talk about that are the people who have billions of dollars on the line.
John Gates is the CEO of JLL. And just to give you a sense of who they are once again, from their website, we buy, build, occupy, and invest in a variety of assets, including industrial, commercial, retail, residential, hotel real estate. And you do that worldwide. I think you're in more than 80 countries. So it's good to have you here. Very simply, for those of us who are freaked out about what's happening to real estate prices in cities, what can you tell us?
JOHN GATES: Well, I think it's too early to tell. We have many data points, and I can find a data point to support just about any suggestion around what will happen. I think that what we need to do is be disciplined and not turn them into curves yet until we get multiple data points and we can start to see real trends happening.
Obviously, what we know for sure is that people have pulled back from any kind of interaction for very good reasons, and there are fewer people in any kind of building, essentially, that you would-- except for homes-- single-family homes and apartments, right? Everything else has far less occupancy. But we believe that, for the most part, this is a transitional period, that we will, in fact, emerge, and it'll be safe to go back to work wherever it is you do work.
RICK NEWMAN: Hey John, Rick Newman here. Earlier in the hour, we were talking about the new Trump eviction moratorium and just the general situation with tenants, including commercial tenants, not able to pay rent or not being able to pay their full rent. How is this working out in the real estate industry? Is there plenty of cushion for this, or are there a lot of landlords who are starting to, you know, feel discomfort because they owe mortgages and taxes and all of that?
JOHN GATES: Well, discomfort yes, Rick, but no, there's a pretty good cushion for this. You know, the Fed has intervened, and that happens a couple of different ways. And then we see rent collections are actually very high across most products. Retail is an obvious exception. If you have a restaurant or two, you cannot pay rent.
If you own the building, there's no sense in kicking that restaurant out. What you're doing is you're forgiving the rent for the time period until somebody can have an operating business that works for them and they can re-employ people and pay them. Because if you push them out, what you have to do is re-tenant the space. There's no reason to do that. So there's a pretty good cushion right now.
ADAM SHAPIRO: John, you are-- at your firm, you've been reopening offices worldwide, in Asia, the Asia-Pacific region, as well as in the Middle East and in Europe. But there's a metric here in Manhattan, New York City, that new leases, roughly 1.3 million square feet. But we're at a level we haven't seen. It's the lowest level in 20 years for new leases. As you're opening offices in other places, are there lessons to be learned about what we're going to get in New Yorks and Chicagos and the major cities in the United States?
JOHN GATES: Yeah, I think there are. Now, effectively, the metric that you saw in New York has played out all over the world in all kinds of cities. In our industry, we've never seen a pullback this rapidly, and it's happened for obvious reasons. And then you have some markets that are-- you need public transportation. And the very vertical nature of New York will cause it to be a longer lead time, I think, to reoccupy fully. But we see very consistently, corporate America, when they pull their own employees or employees want a place to go back to work to, they would like that flexibility around the number of days they're in a week. So I think eventually, you'll see a re-population of all these office buildings to pretty full levels.
RICK NEWMAN: Hey John, are you noticing any important trends along the lines of people relocating from urban areas to suburban areas? I mean, there seems to be a lot of question about whether this is a lasting trend, a blip, something that will reverse itself, or something different.
JOHN GATES: Well, the last thing is the key, Rick. Yes, we have seen a couple of percentage points movement in increasing occupancy levels in the suburbs and multi-family, which is the fastest thing to sort of test, and then decreasing correspondingly in the urban areas. We also see single-family home sales at really all-time highs in many markets. So there-- at least transitionally, there's been a very clear movement for people to move outside the urban areas so they can get some space. The question you just asked, is that longer term, or will that shift back?
RICK NEWMAN: Well, are you seeing any signs of the opposite trend yet, or do you have reason to think people will go back to cities?
JOHN GATES: Well, we-- no, we don't have any data to support that yet. But I-- my personal belief is it'll happen. We haven't seen a major movement of employers suggesting that they're going to relocate jobs out of urban areas. I can get you data points to support just about anything. That's not necessarily a curve.
You see financials going back to work in Manhattan as an example in limited safe quantities. It's obviously crucial to limit the number of people you allow to come back. And there are some major tech companies that have not offered indefinite work from home. They're doing it right now because they believe it's a safe, sensible thing for their people, and that's good.
ADAM SHAPIRO: John Gates is the CEO from JLL, and we appreciate your being here.