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  #1  
Old Posted Jul 16, 2020, 9:20 PM
the urban politician the urban politician is offline
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Big cities pummeled by COVID--best time to start new highrise projects?

For the biggest cities that have specially been spanked hard by the pandemic (NYC, Chicago, perhaps SF) and have effectively had their central cores "stunned" by the economic downturn, I'm thinking that this is the BEST time to start a new highrise project.

Hell, start building in the sector that got hit the hardest (hotel, perhaps office?).

People are avoiding transit. Office vacancies are rising. Hotels might as well have roving man-eating zombies in them, they're so empty. Shops and restaurants are gone belly up.

The construction supply line goes dry and then--pop--by next year or perhaps a bit later, there will be a huge amount of pent up demand for all of these sectors. Given the typical 2 year or so timeline on most big projects, now would be a great time to kick off a new project in these types of cities, if you can land financing.

In a sense, banks are really picking the winners and losers here. If they give you a huge loan, you will win the jackpot in about 2 years.

Thoughts?
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  #2  
Old Posted Jul 16, 2020, 9:58 PM
mhays mhays is offline
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The contrarian view often wins because there's less competition. But hotels might be a little too existential of a question right now...there will be an effect from pent-up demand, but will some percentage of people avoid travel for years to come, and will online tools reduce business travel?

At least with apartments there's ongoing demand to gauge. Those are still breaking ground in my area. And offices if they have deep-pocketed tenants signed up (Amazon HQ1b is going nuts this year). But not hotels so far.
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  #3  
Old Posted Jul 16, 2020, 10:27 PM
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Yeah I think hotels are iffy. So much of Chicago's hotel business is driven by McCormick Place conventions, not even typical tourism or business travel.

I have to imagine that the trade show-industrial complex will be reeling from Covid for years even if a successful vaccine/drug comes along - firms are finding other ways to network and market their products/services that don't involve pricey airfares, hotel stays, and expense-account-fueled debauchery.

If that's the case, then good riddance... turn McCormick Place into a year round venue for youth and amateur-adult sports, turn the hotels into housing, and turn the ridiculous McCormick Busway into a CTA asset.
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  #4  
Old Posted Jul 16, 2020, 10:38 PM
the urban politician the urban politician is offline
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Mark my words, conventions will make a comeback. Big time.

Humans are animals. We need real physical interaction. We aren’t satisfied with computer screens.

That industry is reeling but they will reorganize, get creative, and find a way to accentuate the value of the physical experience.
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  #5  
Old Posted Jul 16, 2020, 11:06 PM
llamaorama llamaorama is offline
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Why would conventions become obsolete due to some irrational phobia of traveling after a major but generally unusual event? Reminds me of the attitude after 9/11, where people were scared to go places because of terrorism. That's just dumb and things will eventually get back to normal.

I think work-from-home is the biggest existential threat right now. The travel phobia is the least major concern, the second concern is the setback and lengthy recovery period for restaurants, bars, and retail.

Conventions could have a new life as a way for companies whose workforce is predominately remote to throw annual gatherings or parties so that teams can hang out in person.
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  #6  
Old Posted Jul 17, 2020, 12:00 AM
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Quote:
Originally Posted by the urban politician View Post
For the biggest cities that have specially been spanked hard by the pandemic (NYC, Chicago, perhaps SF) and have effectively had their central cores "stunned" by the economic downturn, I'm thinking that this is the BEST time to start a new highrise project.
Let's be clear. SF is NOT and never has been a COVID "hotspot". The city has had about 6 deaths per 100,000 population so far (51/850,000) compared to NYC with about 27/100,000. To the degree the city has been "spanked hard" by the pandemic, it's because it was shut down hard and early, and never actually reopened. This accounts for both the economic distress and the low number of cases.

Quote:
Hell, start building in the sector that got hit the hardest (hotel, perhaps office?).

People are avoiding transit. Office vacancies are rising. Hotels might as well have roving man-eating zombies in them, they're so empty. Shops and restaurants are gone belly up.

The construction supply line goes dry and then--pop--by next year or perhaps a bit later, there will be a huge amount of pent up demand for all of these sectors. Given the typical 2 year or so timeline on most big projects, now would be a great time to kick off a new project in these types of cities, if you can land financing.

In a sense, banks are really picking the winners and losers here. If they give you a huge loan, you will win the jackpot in about 2 years.

Thoughts?
Construction, including of hotels, seems to be proceeding apace in SF in spite of the economic conditions you described. I'm not aware of a major project that has been halted or slowed by COVID (there is one very major project that seems to be being slow-walked for other reasons--Oceanwide center).

But in terms of your general point, since I believe COVID will be well in hand by next summer--certainly long before any project begun now could be open for occupancy--I agree with you that COVID is no reason to hold up anything and, if building costs have declined, maybe a reason to get going.
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  #7  
Old Posted Jul 17, 2020, 2:52 AM
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Originally Posted by llamaorama View Post
Why would conventions become obsolete due to some irrational phobia of traveling after a major but generally unusual event?
It's not about a phobia of traveling, that will presumably fade with time. It's about businesses being forced to try new telepresence methods and, probably, some of them will like it! Covid is ushering in these new technologies way faster than they would have developed otherwise.

9/11 isn't a great comparison because the technology wasn't there yet to provide alternatives. The bandwidth simply didn't exist for mass videoconferencing. Without a viable alternative, people eventually had to overcome their fear of air travel, or working in tall buildings, etc.

But I think it's different this time. The future will offer more ways for people to participate in work (or conventions, etc) smoothly at a distance, and will permit them to do so in many cases if they so choose. It'll be a mix. Personally, I don't like working from home on a daily basis (it helps that I had a breezy 10-minute bike commute previously, and I like my office space and my coworkers) but I hate business travel with a fiery passion. Airports suck, hotels suck, convention centers suck. I'm definitely not the only one.

I've already replaced several business trips with Zoom calls and it's wonderful. In some cases there's no substitute for being there - as an architect, I have to physically measure spaces sometimes - but in other cases there's no reason you can't hold a community presentation or a zoning hearing online.
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  #8  
Old Posted Jul 17, 2020, 2:57 AM
llamaorama llamaorama is offline
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Originally Posted by ardecila View Post
It's not about a phobia of traveling, it's about businesses being forced to try new telepresence methods and, probably, some of them will like it!

9/11 isn't a great comparison because the technology wasn't there yet to provide alternatives. But I've already attended several seminars through Zoom and I liked it quite a bit!
But not all conventions are boring seminar laden things, some of them have exhibit or are actually just parties.

A tech company where the majority of employees are work from home might go to SXSW every year, a company might have a big product launch, etc. These could be a bigger deal if you’ve never actually had personal social time with your boss or colleagues before.
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  #9  
Old Posted Jul 17, 2020, 3:26 AM
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Steely Dan Steely Dan is offline
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Originally Posted by mhays View Post
But hotels might be a little too existential of a question right now...

that's what i would have thought too, but then today, the developer of this 47 story/523' mixed-use hotel/apartment tower in chicago announced that they landed financing for their main construction loan and that work will start in august.






we also had a new 835' office tower start construction two months ago, but it's a flagship Hines project that already had Salesforce signed on to an anchor lease prior to the covid madness, so not nearly as surprising as today's announcement about the hotel/apartment tower.






still, that's two major tower projects here in chicago that have landed financing during the pandemic, which is encouraging no matter how you slice it.
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Last edited by Steely Dan; Jul 18, 2020 at 12:09 AM.
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  #10  
Old Posted Jul 17, 2020, 3:28 AM
dave8721 dave8721 is offline
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Miami was just in a boom of hotel building around Downtown (most just about finishing). Probably will be a disaster in the short term. A new office tower had just broken ground downtown, we will see how that pans out. Then again, it takes over a year to complete a building so who knows what the office market will be like in a year.
Also the Port of Miami had just signed a multi-billion $ deal to build a fancy cruise ship terminal and upgrades last year. Its been in the news though that the contract guarantees that Cruise lines have to pay their rent no matter what. The cruise companies are already looking at ways out of paying.
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  #11  
Old Posted Jul 17, 2020, 3:32 AM
galleyfox galleyfox is offline
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Guys, as the child of professional convention salespeople.

Conventions aren’t going anywhere until technology figures out a way to allow entertaining *chance* encounters with other rising professionals in the industry. Business managers want to know if the people they’re dealing with are fun, boring, hyper, slow, deliberate, impulsive, want to switch jobs, looking for a promotion, etc. Most of the real industry news and business happens at the dinner and drinks meet-ups after the convention.

Zoom is fine for now since nobody’s really hiring or taking on new people or trying out new products. But it’s only really good for companies where everybody has worked together for some time and is familiar with the tasks.

Otherwise it’s like internet dating where you’re web stalking to find random person’s information and cold calling them like a credit collector and spamming their e-mail.
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  #12  
Old Posted Jul 17, 2020, 2:51 PM
the urban politician the urban politician is offline
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Originally Posted by JAYNYC View Post
covid 19 cases in Chicago and San Francisco pale in comparison to a number of other large cities. San Francisco County's cases aren't even top 15 in the state (Google: "covid tracker california").
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Originally Posted by Pedestrian View Post
Let's be clear. SF is NOT and never has been a COVID "hotspot". The city has had about 6 deaths per 100,000 population so far (51/850,000) compared to NYC with about 27/100,000. To the degree the city has been "spanked hard" by the pandemic, it's because it was shut down hard and early, and never actually reopened. This accounts for both the economic distress and the low number of cases.
.
^ This has nothing to do with being Covid "hotspots" as much as it has to do with shutdowns.

Chicago had a fraction of Covid deaths as NYC, for example, but both cities were shut down and both economies were hence effectively "shut down" similarly. I imagine SF is in the same boat.

Point being, starting from that point, with there being a dearth of new supply over the next few years, the early entrants into the market 2-3 years from now will likely be rewarded handsomely?
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  #13  
Old Posted Jul 17, 2020, 4:05 PM
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I'm not clear why the "best time" to start a giant construction project is in the middle of a pandemic, national breakdown and great depression.

I also don't see why it matters if said project is a downtown highrise or exurban campus; right now most people are waiting this nightmare out. Once there's a vaccine and federal leadership, normalcy will ensue.
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  #14  
Old Posted Jul 17, 2020, 6:36 PM
the urban politician the urban politician is offline
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Originally Posted by Crawford View Post
I'm not clear why the "best time" to start a giant construction project is in the middle of a pandemic, national breakdown and great depression.

I also don't see why it matters if said project is a downtown highrise or exurban campus; right now most people are waiting this nightmare out. Once there's a vaccine and federal leadership, normalcy will ensue.
The case I'm making takes into account the typical 2-3 year timeline of a large project, coupled with fewer construction starts (hence less supply being added to the market) and the almost certainty that the doldrums of the Covid epidemic will be long over by the time that the project is completed.
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  #15  
Old Posted Jul 17, 2020, 7:46 PM
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covid 19 cases in Chicago and San Francisco pale in comparison to a number of other large cities. San Francisco County's cases aren't even top 15 in the state (Google: "covid tracker california").
Cook county has the third most deaths and second most cases of all counties in the US. That's not a hot spot?

https://coronavirus.jhu.edu/us-map
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  #16  
Old Posted Jul 17, 2020, 8:13 PM
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Originally Posted by the urban politician View Post
^ This has nothing to do with being Covid "hotspots" as much as it has to do with shutdowns.

Chicago had a fraction of Covid deaths as NYC, for example, but both cities were shut down and both economies were hence effectively "shut down" similarly. I imagine SF is in the same boat.

Point being, starting from that point, with there being a dearth of new supply over the next few years, the early entrants into the market 2-3 years from now will likely be rewarded handsomely?
And, as I said, the shutdowns don't seem to have affected construction in SF. But let's just make sure the facts are correct as well.
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  #17  
Old Posted Jul 17, 2020, 8:19 PM
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Originally Posted by Crawford View Post
I'm not clear why the "best time" to start a giant construction project is in the middle of a pandemic, national breakdown and great depression.

I also don't see why it matters if said project is a downtown highrise or exurban campus; right now most people are waiting this nightmare out. Once there's a vaccine and federal leadership, normalcy will ensue.
A New Yorker should just have to look out the window to see a couple of skyline icons that were built during the Great Depression and functioned not only as projects keeping people at work but also something to be proud of for years to come.

The question for any developer has to be what the situation will be when the project is completed and ready for occupancy, usually 2 or 3 years hence. I think the US economy will be doing fine by then. We will have a vaccine for COVID and there will have, by then, been time to give it to most people who want it.

As always, the people who will make money are the ones willing to take a little risk but I don't see that much risk in starting most projects for which there was a market seen a year ago, now. Sure travel (and hotel use) may be slower to return than the need for housing and some companies may need less office space, but I don't think those effects will be as dramatic, once the vaccine exists, as people have been saying.
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  #18  
Old Posted Jul 17, 2020, 9:03 PM
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Cook county has the third most deaths and second most cases of all counties in the US. That's not a hot spot?

https://coronavirus.jhu.edu/us-map
Cook County is the second largest county in the US, so an average number of cases would rank them at or near the top. Chicago has never been a hotspot on a per capita basis.
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  #19  
Old Posted Jul 17, 2020, 9:06 PM
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I'll agree with others on the convention front - they'll be back, and I actually think that in a world where WFH is embraced more broadly conventions could become a BIGGER thing.

I've worked in geographically dispersed teams before, and those teams had more convention attendance than others, just because it was an excuse to get the team together as well as meet other folks in the industry. I could definitely see some roles moving to being largely "remote but you need to attend X conferences in Vegas and Orlando each year which we'll combine with team offsites".
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  #20  
Old Posted Jul 17, 2020, 10:22 PM
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Originally Posted by the urban politician View Post
The case I'm making takes into account the typical 2-3 year timeline of a large project, coupled with fewer construction starts (hence less supply being added to the market) and the almost certainty that the doldrums of the Covid epidemic will be long over by the time that the project is completed.
I would agree with you if it weren't for the fact you're neglecting one important factor.

You're looking at it as if demand was always stable/linear and proportional to population/economy and unaffected by changes in taste, culture, habits, etc. So your conclusion is that since no one is going to build something like a new hotel these days, by the time we're back to normal in 2021, the hotel "supply" will be the same as it was back in 2019, therefore, there should be some unmet demand at that moment, ripe for the picking by someone who had the foresight to plan for it.

It would be valid, if demand behaved like that. But it doesn't. If we start to realize that there's a bunch of things that can be done remotely and that it works nearly as well to do it like that, then there will be a permanent reduction in hotel demand, and in things like conventions, etc.

I personally have been doing remote management and remote meetings a LOT more, and I've also been traveling a lot less these past few years (feels like I can have something acceptably close to these experiences nowadays without having to be there in person).

If I'm representative, that doesn't augur well for airlines, hotels, etc.
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