Understanding Real Rent-at-Risk in CRE

As we all began to realize the seriousness of the COVID epidemic in April, the US Census Bureau started the Household Pulse Survey to track its impact. Census released its first report from the 90-day experiment on May 20th. GeoPhy spent the summer analyzing the data in a series of blog posts.

We were excited because the data set was rich (more than 100,000 responses nationwide), it was fresh (weekly with a one-week reporting lag), and it was forward-looking. It was the first US leading indicator of ability to pay rent that we had found. 

In case you missed our coverage, here’s a summary with links to the original posts. The funding for the survey has expired; Census issued its last report 29 July. 

It inspired GeoPhy’s entrepreneurial nature. We’ve found another way to provide you leading indicators. Look forward to GeoPhy’s new offering this autumn. Interested? You’ll find a link to sign up for updates at the bottom of this summary.

Introducing Rent-at-Risk

23 June: Rent-at-Risk: The Calm Before The Storm?

At the end of 2Q, the NMHC and other organizations were reporting that rental payments continued to be solid. This view didn’t sit right with us. With millions of Americans laid off or furloughed, something had to be off. The happy reports seem to glide over how tenants with no jobs were able to continue paying rent.

We sought to quantify these fears about tomorrow that were not reflected by last month’s rent in the bank. Our initial blog by GeoPhy CEO Teun van den Dries introduced the concept of rent-at-risk, drawing from the Pulse survey data through 10 June. We identified by state and metro area the percent of Americans concerned about making their July rent.

Anxiety Builds Around July Rents

6 July: Rent-at-Risk Rises Heading into July

In our first update, we refreshed the data through 23 June. The analysis indicated increasing anxiety among tenants as June came to an end. Using data visualization techniques, we documented the shift at both state and metro areas in the two weeks since our initial report.

Pulse’s Insights into Apartment REITs

22 July: Do REITs signal private market pain, too?

Using our data analytics capabilities, GeoPhy Chief Economist Nils Kok and data scientist Ali Ayoub extended the implications of the Pulse data to 12 apartment REITs’ holdings. 

Kok and Ayoub first mapped REITs’ properties using GeoPhy Neighborhoods to understand their exposure to COVID-19 induced layoffs and furloughs. Next, they tapped Pulse’s 7 July survey data to understand property’s rent-at-risk based at a metro level.

Finally, the analysis looked at the share price movements for each REIT, offering assessments of which looked over-priced or might have suffered an over-correction by investors.

Worsening into August

29 July: Non-Payment and Rent-at-Risk Increase

Our update indicated an increase in people not making June’s rent (over May) and an increase in rent-at-risk for August. Geographically, the inability or unwillingness to pay rent spread with 19 states indicating that 25% of renters didn’t pay June rent.

Extending Pulse Beyond Apartments

27 August: Retail is Dead? Long Live Retail CRE Assets!

Last week’s final update extended the Pulse data’s implications to retail REITs. The Pulse data helps us paint a more nuanced picture than the usual retail doom. It identifies neighborhoods with limited exposure to COVID layoffs which should retain their purchasing power. It also helps find opportunities for redevelopment.

Onward

We have maintained throughout our series that the Pulse survey provides important facts about the market. The primary reality has been the $600 per week supplement to state unemployment benefits by the CARES Act. (You should also check out the analysis of the relative impacts from varying state unemployment benefits by Managing Director Corey Gustafson at our appraisal joint venture Apprise by Walker & Dunlop.)

Extension of the CARES Act became a political football in mid-summer. The Administration and Congress could not come to an extension agreement before Congress adjourned for its August recess. President Trump subsequently claimed Executive authority to extend the benefits unilaterally.

We shall see if he has that authority – or if he and Congress can strike an extension during the late innings of a presidential campaign. We will also see if we were correct that apartment owners face a cliff of non-rent-payment with the CARES Act expiration.
But you won’t have to wait long to get a new leading indicator. GeoPhy is prepping a new offering that will be available this Autumn. To learn more and keep up to date on our launch, sign up for a one-on-one explanation of what we’ve got coming.