Workers must return to offices before malls can reopen

People need to get back to work — and will likely spend weeks in the office — before they get back in the mall, according to the owner of Hudson Yards in New York. 

“My guess is we go back to offices first,” Related Companies CEO Jeff Blau told CNBC’s Andrew Ross Sorkin on Tuesday. “I think retail is going to be a second step. I think retail is going to be much slower to come back. Just because people go to their offices, I don’t think they are going to rush out to congregate in restaurants.” 

Some of Related’s retail properties include Hudson Yards and The Shops at Columbus Circle in Manhattan. Related’s portfolio of real estate in the U.S. also includes office buildings and residential towers. 

The reopening of retail centers after the coronavirus pandemic subsides will come “weeks past” commercial offices reopening, Blau emphasized.

And things are going to look a lot different, when that time comes.

Related is already testing a handful of temperature-scanning machines at construction sites, for example, which could be rolled out to office buildings and malls.

“Everyone will be in masks,” Blau said about people getting back to work. “Do you touch elevator buttons?” 

Cushman & Wakefield Executive Chairman and CEO Brett White said Monday that permanent changes are inevitable.

“Back to normal in the workplace is going to be anything but normal,” he said.

Related, like other retail real estate landlords, has seen a drop-off in the number of rent checks coming in, as retailers are grappling with steep sales declines as Covid-19 forced stores to shut. 

For Related’s residential tenants, the landlord has collected more than 90{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of April rents, Blau said, adding there has been “little push-back” there. 

In the commercial office space, “essentially all rents” for April have been collected, the CEO said. 

But the soft spot has been retail, he said, where most tenants are still holding off on paying rent while waiting for government relief programs to kick in. Related has collected about 35{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of April rents from retail tenants overall. In its enclosed shopping malls, only about 20{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of rent checks have come in, Blau said. 

“All of those assets have really suffered,” Blau said about Related’s malls. 

Some national companies that have said they are not paying rent in April include co-working operator WeWork, high-end fitness chain Equinox and eatery The Cheescake Factory. 

A new analysis by New York-based research firm Trepp saw a spike in commercial mortgage delinquencies in the hotel and retail sectors in April.