If Recession Hits, Coworking Space Is Like A Leaky Vessel Heading Into The Storm

Coworking spaces allow freelancers and companies in growth mode access to flexible lease terms. But real estate experts see headwinds ahead for less sophisticated coworking businesses, and ones relying on one company or industry, if a recession hits.

Those most at risk are coworking spaces with a mix of corporate users and individuals who occupy open desks inside the same building, WorkSuites CEO Flip Howard said.

Products along these lines are heavily funded by a few larger corporate tenants seeking shorter office leases. If these companies decide to suddenly depart or ask tough budgeting questions during a recession, their evacuations could cause sudden pain for less prepared coworking ventures, Howard said.

“I see spaces coming out that are WeWork-like, they have a freelance, hip collaborative [concept], but their revenue comes from corporate users,” he said.

Coworking giant WeWork is leaning heavily into that model, recruiting larger corporate leases through its enterprise model. Going a step further, the company has devised a two-year membership plan, which it calls HQ by WeWork, to give corporate clients shorter-term lease options in space exclusive to the tenant.

“When the market turns down, do these corporations that are paying two or three more times for their office space in exchange for a cool environment and flexibility stay?” Howard asked.

Some will and some won’t, he said. The same goes for the coworking spaces they occupy. As an operator of flexible office space, Howard is mindful of not depending on one large tenant. WorkSuites currently has 14 locations in Dallas-Fort Worth and five in Houston.

“I’ve had to practice restraint in not letting one single client get too big,” he said. “If they have 20 people that means they are only there for flexibility, which means by definition they are not there to be with you forever.”

Whitebox Real Estate President and Managing Director Grant Pruitt has the same reservations about newer providers and landlords who are not mindful of what types of coworking firms land on their monthly rent rolls. He saw culling of similar product in the recessions of the early 2000s and 2008, making him more wary of overbuilding in one segment of the market — even if it is a segment that is otherwise primed to stay active.

“[Coworking] feels like the data center business in the 2000s, when everyone who could house a server was converting to a data center, and with so many entrants to the market, there is price compression and consolidation of firms,” Pruitt said. “You saw that with executive suites during the recession as well. Everyone flooded into that market, but when times got really tough, you had to have staying power to sustain the downturn.”

Pruitt expects to see some culling of coworking spaces if another downturn hits, but the exact level of impact is unknown. He advises landlords who lease out large amounts of space to coworking tenants to exercise some due diligence before signing leases.

“I would be very concerned about track record,” Pruitt said. “You want to pay attention to the ownership side [of coworking firms]. Who is it and what is it? How is it capitalized? Really pay attention to how much of the building they occupy, because if something happens and you lose that tenant, how does that play into your building or portfolio?”

Still, Howard and Pruitt believe office-sharing is here to stay in different forms — from executive suites to desk-sharing and a combination thereof.

“It is filling a void that was there prior to it, and I think you are going to continue to see it,” Pruitt said.

“I don’t think coworking is a fad. I think it is here to stay,” Howard said. “Even if there is a downturn, the overall amount of demand for this is going up because we live in the sharing economy.”

Data from JLL supports Howard and Pruitt’s assertion that while some players in the space may face challenges, especially during economic slowdowns, flexible office space is booming. The sector has grown at an average annual rate of 23% since 2010 and is expected to comprise 30% of the office market by 2030, up from just 5% today. Dallas-Fort Worth ranks No. 12 in a recent JLL study outlining the top 15 markets primed for additional growth in office sharing, and office marketplace LiquidSpace reported that Dallas already possesses the largest swath of coworking space in Texas — over 1.2M SF.

Despite the risk of price compression and consolidation, both Howard and Pruitt admire what coworking has done for office tenancy overall.

“The biggest obstacle was lack of awareness that our type of product existed. WeWork is solving that for us, so we see more demand for our type of office space,” Howard said.

Investors love it, too.

“In some way shape or form, you will have a coworking component to your stack of real estate offerings,” Pruitt said.



Cellectis to bring CAR-T manufacturing in-house with new plants

  • Cell therapy biotech Cellectis will build an 82,000-square-foot commercial manufacturing facility in North Carolina to make its allogeneic CAR-T products, announcing last week that it had signed a lease for the site.
  • Dubbed IMPACT, the planned facility in Raleigh, North Carolina, will handle both clinical and commercial production, Cellectis said.
  • The drugmaker has also begun construction of a 14,000-square-foot facility in Paris, France to make the starting material supply for its UCART products. Both the Paris and North Carolina plants are intended to be Good Manufacturing Practice-compliant.

Like many biotechs before it, Cellectis has relied on contract manufacturers to produce clinical trial supply and starting materials for its flagship UCART products.

Last year, however, the company decided it would take manufacturing — a critical step in cell therapy — in house.

“Now is the right time to create our own supply competencies,” said Cellectis CEO André​ Choulika in a March 7 statement. “Cellectis will gain autonomy, control and expertise in manufacturing operations, allowing us to continue to build competitive advantage and remain the leader in our field.”

Cellectis’ announcement on the planned North Carolina plant comes three months after the company took on a new head of U.S. manufacturing, Bill Monteith, and tasked him with overseeing the establishment of commercial manufacturing capabilities in the U.S.

Cellectis has been a player in the CAR-T space for some time, but has moved slowly with development of its allogeneic technology.

Unlike the approved CAR-T products Yescarta (axicabtagene ciloleucel) and Kymriah (tisagenlecleucel), allogeneic CAR-Ts use donor cells rather than the patient’s own cells.

By Cellectis’ approach, donor T cells are engineered using the biotech’s TALEN gene editing technology to express a CAR capable of targeting cell-surface antigens. Allogeneic CAR-T holds the potential to side-step the time-consuming logistics required to ship patient cells to a manufacturing center and back again, earning the technology the moniker of “off-the-shelf.”

With speedier manufacturing, allogeneic cells could potentially cost less and be delivered more quickly, enabling faster treatment. Those advantages, however, come with greater immunogenic risk and, so far, the technology has proved challenging to develop.

Last April, Pfizer gave the then-newly created company Allogene Therapeutics control to development of 16 preclinical allogeneic CAR-T candidates originally licensed from Cellectis — a move some interpreted as frustration with the French biotech’s progress. Pfizer kept a 25% stake in Allogene, which is led by former leaders of CAR-T pioneer Kite Pharma.

Allogene also secured rights to an allogeneic CAR-T candidate, UCART19, which had been licensed from the French company Servier.

While Allogene and Cellectis are in the forefront of allogeneic CAR-T developments, other biotechs like Tmunity are following close behind.


Real-Estate Industry Blasts ‘Pied-à-Terre’ Tax on High-Value Second Homes

The New York real-estate industry is launching a frontal assault against a plan in Albany to impose a stiff annual tax on wealthy owners of part-time homes in New York City, warning it could topple an already weak housing market.

Some in the industry also maintain that the new tax would raise far less money than the government is projecting.

John Banks, president of the industry lobbying group the Real Estate Board of New York, said it was a “bad tax that has no analysis behind it” that could have ripple effects in the city’s economy.

He said that if wealthy foreigners stay away, it could cut into revenues of restaurants, retailers, and even taxis, and lower property-tax collections as apartment values fall.

Legislators who support the tax say it is appropriate to ask wealthy nonresidents to pay more at a time of growing income inequality, and when the city’s infrastructure is desperately in need of upgrades.

The proposal for a so-called pied-à-terre tax on homes worth $5 million or more on nonresidents has been lingering in Albany since 2014. The plan gained traction in the last few days as Gov. Andrew Cuomo and the legislative leaders, all Democrats for the first time in years, grasped for new revenue to close a large budget gap. At one point last week, Mr. Cuomo said it was the only tax proposal they were able to agree on.

“If they have the money to buy a $5 million apartment, which is not their prime residence, and it’s their little Manhattan getaway, they can afford the tax,” Mr. Cuomo said in recent radio interview.

The owner of a home valued at $41 million would owe an additional $1 million in taxes each year, an analysis of the proposed legislation shows.

The measure could be adopted in the next few weeks, as the state races to adopt a budget by the start of the new state fiscal year on April 1.

Manhattan real-estate sales fell 12% last year compared with 2017 levels, the worst sales pace since 2009. Developers and brokers warn that the new tax could drive down sales and prices further and halt construction projects.

Since the purchase of a second home depends on sentiment rather than need, the hefty tax would lead buyers to look elsewhere, brokers say. That could put architects and construction workers out of work.

The real-estate industry isn’t the only one urging caution. Citizens Budget Commission, a civic group, has urged the state to take more time to study potential impact of the measure before acting.

Vancouver and Paris have imposed extra taxes on apartments deemed to be vacant in an effort to free up apartments in a housing shortage. But New York’s effort is focused solely on the wealthy and imposes a vast new tax burden that in many cases will be five times to 10 times higher than property taxes paid by New Yorkers.

The nominal tax rates range from 0.5% for the portion of homes valued above $5 million up to 4% for the portion of a home above $25 million. But the proposal establishes a new higher method to value properties not imposed on owners of other condos and co-ops, making the new taxes far beyond what would otherwise be charged.

A 50-foot wide mansion on East 71 Street near Central Park that last sold in 1989 is now facing a $347,000 annual tax bill. But the city values the mansion, owned by a non-city resident, at nearly $56 million, and it would face an additional $1.6 million in taxes each year under the bill.

Or take the 20th-floor penthouse at 15 Central Park West purchased for $88 million in 2012 by the daughter of a Russian billionaire. Since New York law bars assessors from looking at actual sale values, the tax bill on the penthouse is about $153,000. Under the proposal, she would owe nearly $2.9 million more each year, based on the $88 million value.

The potential revenue from the bill is in dispute. City Comptroller Scott Stringer, who supports the measure, said the tax could raise $650 million or more, based on a Senate bill introduced by Brad Hoylman, a Manhattan Democrat.

But the bill as written would force many New York residents to pay, too. The new tax would apply to any individual who bought a home through a corporation or a limited liability corporation.

Using city tax and property records, The Wall Street Journal estimated that there were about 14,400 co-ops, condos and houses worth $5 million or more, of which about a third were held in corporate names.

The comptroller’s office estimated that about 5,400 pied-à-terre owners would have to pay the tax. But that figure includes full-time New York residents who bought homes through an LLC. If those homeowners end up excluded from the new tax, the revenue would be likely be lower, according to the real-estate industry.

Asked if some New York residents would be hit by the tax, Mr. Hoylman said that the final legislation would give the city council or the city’s finance commissioner the ability to shape the final rules fairly.

He said that an owner of a $6 million home would pay a modest premium of $5,000, less than monthly maintenance on some condos. “These are extremely wealthy individuals; these are second and third homes,” he said. “So this is not about the ability to pay.”

Bruce Cohen, real-estate lawyer, said that if the new measure drives away wealthy buyers, New York won’t get all of the expected tax windfall. Gains from the tax would be offset by the loss of city and state transfer taxes, which typically total 2.825% of the sale price for properties sold for $1 million or more.

Pam Liebman, the president of the Corcoran Group, said that if the tax goes through, it could cut property-tax revenues. She said one buyer looking at a $30 million condo decided to hold off after learning of the legislation.

“If the real-estate market suffers, everybody will suffer,” she said. “The condos will become rentals, the construction trades will lose out. Nobody will build another building.”


Amazon second headquarters faces new blocks in Virginia funding vote

Amazon.com Inc’s plan to set up a second headquarters in northern Virginia, after being rebuffed in New York, will face its first test when local officials vote on Saturday on a proposed financial package worth an estimated $51 million.

Amazon in November picked National Landing, a site jointly owned by Arlington County and the City of Alexandria, just outside of Washington, along with New York for its so-called HQ2 or second headquarters. That followed a year-long search in which hundreds of municipalities, ranging from Newark, New Jersey, to Indianapolis, competed for the coveted tax-dollars and high-wage jobs the project promises.

Amazon in February abruptly scrapped plans to build part of its second headquarters in New York after opposition from local leaders, who were upset by incentives promised by state and city politicians.

While opposition in Arlington is still nascent, the vote has become a political flashpoint between the project’s supporters and activist opponents. It has given local activists the chance to push for a delay so that the county’s proposal can be reviewed and debated further.

A five-member panel of the Arlington County Board will vote on whether Amazon will receive the estimated $51 million, a fraction of the $481 million promised by the county. Only 5 percent of the incentives are direct.

Amazon has also been offered a $750 million package by the state that the Virginia General Assembly approved with little opposition.

The scene at Saturday’s vote is likely to be different. At least 100 members from local activist groups are expected to attend. Protests are expected to begin at least an hour before the vote comes up for hearing at 1 pm EST, Reuters has learnt from labour groups.

The $51 million includes a controversial direct financial incentive or cash grant of $23 million to Amazon over 15 years, which will be collected from taxes on Arlington hotel rooms. The grant is contingent upon Amazon occupying six million square feet of office space over the first 16 years.

Arlington has also offered to invest about $28 million over 10 years of future property tax revenue in onsite infrastructure and open space at the headquarters site.

A filing on the county board’s website says the $23 million grant and the $28 million in strategic public infrastructure investments were “instrumental in Amazon choosing Arlington for its headquarters.”

A county spokesman declined to comment.

Arlington County Chair Christian Dorsey has stated publicly he had “no interest” in postponing the vote, had heard no suggestions to do so from other board members, and expected the measure to pass.

Amazon’s 25,000 new jobs will help offset the more than 34,000 jobs Arlington has lost since 2003 due to federal agency closures and other factors, and help diversify the local economy, company spokeswoman Jill Kerr said. “Our investment of $2.5 billion will generate more than $3.2 billion in tax revenue which can be used for public services.”

Activists from For Us, Not Amazon, a coalition of nine labour groups and grassroots organizations working in areas such as minority advocacy, are not convinced.

Roshan Abraham, an organizer from Our Revolution Arlington, a coalition member, said his group wants Amazon to engage with the community more, hold public hearings on the company’s investments, address rising housing costs, displacement of low-income families near the proposed site and donate to affordable housing funds.

“What we are very concerned about is Amazon has met behind close doors, at invitation events, but haven’t met with the community in a public, accessible way,” he said.

Amazon said it has met with many community leaders and residents, including local businesses, nonprofits, and community and civic associations and will continue to engage with them as it expands its presence in Arlington.


Here’s Where NYC Homes Are Selling Above (and Below) Asking Price

Image of One57

Last year, an astounding 70 percent of the homes listed for sale between March and May eventually went for below their initial asking price. In Manhattan, the trend was particularly acute, with 77 percent closing below asking. While 61 percent of Brooklyn listings also closed below ask, some pockets saw a large share of homes close for far higher than their original price.

Here, we look at neighborhoods in Manhattan and Brooklyn that saw the most closings above and below asking price, and consider what that means for the broader NYC housing market.

Luxury-Dense Neighborhoods See Highest Share of Discounted Closings

Over the last year, luxury condos in Midtown particularly struggled to maintain value. Some 92 percent of homes listed last spring closed below ask. And many properties actually sold at a loss: One StreetEasy report found that 39 percent of the Midtown homes sold between 2014 and 2018 actually went for less than their previous purchase price.

Image of Tribeca

Downtown Manhattan’s Trendiest Neighborhoods Flounder

The difficulty plaguing sales in Midtown Manhattan also impacted sales downtown. Although a Tribeca address has long been synonymous with cool, prices there are proving too rich for their own good. Last spring, a resounding 90 percent of all listings in the neighborhood sold below ask. Just to Tribeca’s north, SoHo faced similar struggles, with 89 percent of listings closing below ask.

Image of FiDi / Battery Park City

Value-Friendly Downtown Neighborhoods Struggle, Too

The historically more affordable downtown neighborhoods of Battery Park City and the Financial District fared little better. In fact, 94 percent of all sales in Battery Park City sold closed below ask, even though the median asking price there was $1,250,000, compared to Downtown Manhattan’s $2,199,000. Despite its ostensible value, the density of BPC’s homogeneous housing stock, as well as its prevalence of land-lease buildings, likely contributed to the difficulty of selling there.

Over in the Financial District, the market is slightly healthier, with only 86 percent of listings closing below ask. Prices are slightly higher than in Battery Park City, with a median of $1.4 million. Despite the two neighborhoods’ proximity, there are some key differences. In FiDi, there were 15 condominiums built since 2015. In Battery Park City, there were zero. FiDi’s newer housing stock may prove easier to sell, at least in the short term, than the older condos in Battery Park City. But if recent sales are any indication, future sellers in the area may need to enter the market with more modest expectations.

Image of Park Slope

Brownstone Brooklyn Continues to See Closings Above Ask

Neighborhoods traditionally considered part of brownstone Brooklyn have managed to buck the citywide trend. Last spring, nearly half of all sales in Fort Greene closed above asking price. Close behind, Carroll Gardens saw 46 percent of sales close above ask. And in the most iconic brownstone Brooklyn neighborhood, Park Slope, a solid 40 percent of sales closed above ask.

If anything, the performance of these markets compared to Manhattan speaks to the uniqueness and relative value of their housing stock. All three of these areas are dense with 19th century Victorian architecture, which often means historic interior details and plenty of curb appeal. While not everyone may want a historic home, these neighborhoods clearly offer value. Both Park Slope and Fort Greene have significantly lower median asking prices than Manhattan. Especially in the current market, homes priced more modestly are more likely to close above asking price than aggressively priced homes.

Image of Ditmas Park

Neighborhoods Near Prospect Park Also Close Above Ask

Of the six neighborhoods directly abutting Prospect Park, five saw 38 percent or more sales close above asking price. In Windsor Terrace, a small neighborhood just south of Prospect Park, 42 percent of sales closed above ask. Thirty-eight percent sold above ask in Ditmas ParkProspect Heights and Flatbush.

Like brownstone Brooklyn, homes in the neighborhoods abutting Prospect Park — especially Ditmas Park and Windsor Terrace — have an appealing originality and charm. These are among the few places in the city where buyers can land a home with a rambling front porch, private garage and even a front yard.

They are also among the few places in the city where buyers can find direct access to green space along with relative affordability. All six neighborhoods surrounding Prospect Park have median asking prices well below Manhattan’s. Some, like Windsor Terrace and Flatbush, have median asking prices even below the $947,245 figure for Brooklyn overall.

Big shifts are happening in the NYC housing market. But as the Brooklyn data suggests, buyers are still willing to pay above asking price for a pleasant location, original design and good value.


No new natural gas hookups in New York’s Westchester County: Con Ed

New York energy company Consolidated Edison Inc said on Friday it still plans to impose a moratorium on new natural gas service in parts of Westchester County after March 15 despite a $250 million plan by the state to reduce energy usage.

“The moratorium will still go into effect after March 15,” Con Edison spokesman Allan Drury said, noting the company needs to stop hooking up new gas customers to avoid compromising gas system reliability because of limited space on existing interstate pipelines into the region.

Westchester County is north of New York City.


New York State has blocked construction of new interstate pipelines for environmental reasons for years as Governor Andrew Cuomo and other state officials want utilities to focus more on renewable power sources and energy efficiency programs, instead of building more gas and other fossil fuel-fired power plants and infrastructure.

Consumers, however, want access to more gas to heat homes and businesses because it is cheaper and cleaner to burn than oil. This winter, U.S. Northeast households, on average, are expected to spend $723 to heat with gas and $1,646 with oil, according to federal estimates.

Drury said Con Edison has received more than 1,300 applications for new gas hookups since notifying the state of the moratorium on Jan. 17, well above the number the company normally receives during a two-month period.


On Thursday, the state announced several steps totaling $250 million to reduce energy consumption and fund alternative energy programs.

The state said the programs will “provide immediate relief to Westchester County businesses and residents affected by Con Edison announcement that it will put new applications for firm natural gas service on a waiting list beginning March 15.”

The programs, which are estimated to reduce energy consumption equivalent to the amount of gas needed to heat over 90,000 homes, include funding for clean energy alternatives like electric heat pumps and high-efficiency appliances.

The problem with those programs is they only reduce demand, not boost gas supplies.

To provide gas to more customers and maintain system reliability, Con Edison has said it needs more programs to reduce demand and more interstate pipelines and storage facilities.

Several energy companies have tried for years to build gas pipelines from the Marcellus shale in Pennsylvania to New York, but regulators in Albany have denied some of those projects, like Williams Cos Inc’s long-delayed Constitution pipeline.


Top Ten Cities That Homeowners Don’t Want to Leave

As a lack of home inventory and rising prices remain a challenge for buyers, many people are opting to stay put in their homes.

And thanks to a recent study from LendingTree, we now know the cities in which people are particularly inclined to stay put for a long time.

A dearth in newly-built homes is to blame for the inventory shortfall, said Tendayi Kapfidze, LendingTree’s chief economist.

“The inventory shortage is often attributed to a lack of sufficient new construction, as many home builders left the industry after the crisis, and increasingly expensive labor and materials have reduced the margins on lower-priced homes,” Kapfidze wrote. “There is also a decreased supply of existing homes available for sale, which accounts for a much larger share of the total housing market than new construction. Many current homeowners are reluctant to move, as risk aversion set in after the crisis. Reduced labor market mobility has also led to less people leaving their homes and, more recently, higher mortgage rates have locked in many current homeowners, as a mortgage on a new home would mean an even higher interest rate.”

Regardless of the cause, many homeowners around the nation are staying put. In its analysis, LendingTree evaluated the 50 largest cities in America for how long on average owners are staying in their homes.

In general, homeowners stay in their homes for about seven years, according to the analysis. No. 1 Pittsburgh reported the longest home tenure with 7.54 years, while No. 50 Las Vegas netted the shortest tenure at 6.36 years on average.

While a year might seem insignificant, LendingTree’s research finds a sizable difference in home price appreciation in relation to average tenure.

Typically, cities with shorter housing tenure have greater price appreciation. The top 10 cities on LendingTree’s ranking had an average tenure of 7.46 years and reported an average three-year home price appreciation of 12 percent.

The bottom 10 in the ranking have an average tenure of 6.63 years and an average price appreciation of 30 percent. Kapfidze said that fact suggests higher housing turnover drives prices upwards, while quicker price appreciation of could be luring homeowners to sell.

There are several geographical trends to pull from the study as well. For instance, hot and sunny places have the shortest tenures — such as No. 44 Tampa Bay, No. 45 Jacksonville, No. 47 Orlando and No. 49 Phoenix.

The Northeast U.S. commands the list for the housing longest tenures. The top three cities respectively are, Pittsburgh, New York City and Buffalo, and three other northeastern cities — No. 4 Philadelphia, No. 6 Hartford, Conn., No. 9 Providence, Rhode Island — are in the top 10.

For the full ranking, check out the list below.

Places where people are sitting on their homes the longest