S&P Global — 24 Aug, 2020
Daily Update: August 24, 2020
By S&P Global
Alongside the coronavirus pandemic’s many disruptions, ways of working and where people want to work may be permanently transformed as white-collar workers consider making an exodus from the big cities where big business previously reigned. Should they stay, or should they go now?
“The appeal of living in a megacity compared to a smaller city or a town or a suburb has been dramatically reduced due to this change in views towards working from home,” HSBC Chief Economist James Pomeroy told S&P Global’s Essential Podcast this summer. “This working from home shift has made people realize that just because you're working from home, you're not slacking.”
The shift to remote working will likely have monumental and lasting implications for large cities with longer commute times. Nearly half of office employees in London, the largest city in Europe, are working from home full-time, according to a recent survey by Morgan Stanley’s research unit AlphaWise. In other major European cities, the proportion of office employees homeworking full-time ranged between 20% and 30%. Of the 4,300 office workers in the U.K., France, Spain, Italy, and Germany surveyed, 82% said they wanted to continue working remotely, despite some having already gone back into their workplaces.
"I truly believe that companies will come back to having people in their offices, perhaps in different setups," Giacomo Balzarini, the CEO of the major European real estate firm PSP Swiss Property that owns a portfolio primarily made up of office properties worth nearly $9 billion in Switzerland's largest cities, said during a first-half earnings call, according to S&P Global Market Intelligence. "Perhaps they need, in certain cases, even more space. It's just not feasible anymore to have space of eight to 10 square meters per employee."
In Finland, the amount of available rental units swelled during the first half of this year as universities closed and students returned home, creating “temporarily a bit of an unusual situation,” Jani Nieminen, the CEO of the country’s largest listed residential landlord Kojamo Oyj, said during a first-half earnings call, according to Market Intelligence. According to Mr. Nieminen, the situation will be temporary for the business, which is working to capitalize on Finland’s urbanization as the trend of people moving from rural areas and small towns into cities creates the need for 700,000 new homes within the next two decades.
In the U.S., as most universities plan to teach a mix of in-person and online classes in the coming school year, many students may still return to campus as the pandemic diminishes their opportunities to travel or find work. “You're going to have the choice of remaining in your parents' house … or giving campus a try," Morningstar Credit Research Assistant Vice President Joe Shmigelsky said in a Market Intelligence interview.
The increased amount of student housing has limited landlords' ability to raise rents, especially at properties farther from college campuses, according to Morningstar Senior Vice President Gwen Roush, who told Market Intelligence that after many campuses closed in May student housing delinquencies spiked to 9.5%. This marked a large increase for the delinquency rate for student housing loans in commercial mortgage-backed securities, which stood at 3.8% in April compared to 1.6% for commercial mortgage-backed securities loans across property sectors.
“If you have fewer people going in and out to city centers for work, even if you go from five days a week to three days a week for half the population, that's a substantial drop in the number of people who are going past … coffee shops that are near offices, pubs, bars, or restaurants that make money off of that footfall. It becomes extremely challenging for them,” Mr. Pomeroy said. “All of this means that city's going to look quite different. If you have fewer people commuting in every day, you have a different sort of generation of people living in cities. The businesses that operate there or exist there may have to change some of their models.”
Approximately one-third of Americans would move to a new city or state if they could work remotely indefinitely, according to an August survey of more than 2,700 adult U.S. workers by the consumer intelligence research firm CivicScience. The same number of U.S. workers said they didn’t know when they will be returning to their workplaces, but more than half of the individuals polled are already back working in their offices. Those with higher annual incomes were more likely than any other earners to indefinitely work remotely or already be back in the office.
Many corporations in the U.S. have postponed their office reopening plans as coronavirus cases continue to rise across the country. Nearly 60% of employers said they delayed such plans due to the increases in infections, according to an Pacific Business Group on Health survey conducted this month of 15 large companies that together employ a total of 2.6 million people.
Nearly 90% of workers feel satisfied working from home, according to a New York Times-Morning Consult survey of 1,123 remote workers this summer.
“Cities will probably get younger,” Mr. Pomeroy said. “Cities are going to have to appeal to people to stay there. I think this is going to be one of the biggest challenges for cities all over the world. Large cities already have a lot of people. Smaller cities are trying to attract people. Now you don't have that natural draw of workplaces. You need to now say to people, ‘Well, come and live here because we're going to give you this amazing quality of life.’”
Today is Monday, August 24, 2020, and here is today’s essential intelligence.
The Future of Credit
Default, Transition, and Recovery: Corporate Defaults In Europe Hit An All-Time High
The 2020 global corporate default tally reached 159 as of Aug. 19, 2020. The issuers that defaulted are: Texas-based midstream energy company Martin Midstream Partners L.P. and Georgia-based metal and vinyl building products producer Omnimax International Inc. Additionally, S&P Global Ratings has revised the default tally to account for defaults whose ratings were withdrawn prior to default, including Delaware-based in-store media solutions provider Mood Media Corp. and one confidential issuer from Europe.
—Read the full report from S&P Global Ratings
Credit FAQ: Implications Of Brazilian Meat Processors' Juicy Second-Quarter Results
Brazil-based meat processors posted very strong second-quarter results, especially JBS S.A., Marfrig Global Foods S.A., and Minerva S.A., and to a lesser extent, BRF S.A. The COVID-19 outbreak affected consumer eating habits and production standards, but these companies were able to adjust their portfolios and channels. At the same time, their sound diversification in terms of plants and protein types offset disruption in sales.
—Read the full report from S&P Global Ratings
Technology & Innovation
Listen: MediaTalk – Episode 15 – Broadcast Revenue Trends: Part 1
In Part 1 of this episode, hear from Justin Nielson, an analyst tracking the broadcast and media industries at Kagan, a research unit within S&P Global, and Davis Hebert, a senior high yield research analyst at Wells Fargo, on how broadcast ad sales have suffered during what has been projected to be a banner year for the presidential election cycle.
—Listen and subscribe to MediaTalk, a podcast from S&P Global Market Intelligence
MediaTalk – Episode 15 – Broadcast Revenue Trends: Part 2
In Part 2 of the episode focusing on broadcasters, we zoom in on the latest broadcast technology as well as trends in retransmission consent, a major part of the broadcasters’ revenue streams. Justin Nielson, a Kagan analyst tracking the broadcast and media industry, and Davis Hebert, a senior high-yield research analyst at Wells Fargo, are in the house again.
—Listen and subscribe to MediaTalk, a podcast from S&P Global Market Intelligence
ESG in the Time of COVID-19
Out of the crisis, developers see policy, investment tailwinds for renewables
Battered electricity demand, plummeting power prices, construction delays and administrative hold-ups: The fallout from the coronavirus pandemic provided a challenging backdrop for independent renewable energy developers and operators across Europe during the second quarter — but there are plenty of green shoots, too. "It wasn't a great quarter when looking at the power prices," Daniel Johansson, CEO of Swedish wind farm developer Arise AB (publ), said on the company's July 17 earnings call. In the Nordics, a decline in the underlying commodity complex coincided with high hydro volumes, squeezing forward prices even further.
—Read the full article from S&P Global Market Intelligence
Jaguar aims to upcycle aluminum, cut carbon footprint
Automaker Jaguar Land Rover has committed to research that could lead to up-cycling of aluminum waste from drinks cans, bottle tops and end-of-life vehicles into new vehicles, potentially cutting C02 emissions by 26%, the company said August 21. The REALITY aluminum project is a key part of Jaguar's "Destination Zero" mission to its carbon footprint. Engineers were able to use the recycled aluminum parts and mix it with a lower amount of primary aluminum to form a new and tested prototype alloy, comparable to the existing Jaguar Land Rover grade and quality, it said in a statement to the market.
—Read the full article from S&P Global Platts
The Future of Energy & Commodities
US voters support competitive power markets over government support: EPSA
Roughly two-thirds of voters oppose policies that support struggling power plants through higher utility bills or taxes and only 7% believe consumers should pay for new or existing power plants, an Electric Power Supply Association poll released Aug. 20 showed. "Americans understand that struggling power plants should retire, and that political influence only results in higher bills and less efficiency," Todd Snitchler, president and CEO of merchant power generator trade group EPSA, said in an emailed statement.
—Read the full article from S&P Global Platts
Calif. power shortfall forces sweeping review of grid reliability strategy
Arnold Leitner, founder and CEO of YouSolar Inc., launched his Emeryville, Calif.-based startup in 2013 to sell residential solar-plus-storage systems in emerging markets around the world that lack reliable electricity. Now he sees that opportunity unfolding in his home state after rolling blackouts hit millions of Californians during a sweltering August heat wave and as concerns mount over a repeat of Pacific Gas and Electric Co.'s widespread October 2019 outages to prevent its power lines from sparking wildfires.
—Read the full article from S&P Global Market Intelligence
Israel's energy sector eyes opportunities following normalization with UAE
The UAE and Israel's recent landmark deal heralds significant opportunities for trade between the two countries, including crude and oil products, that could result in new trade flows in the region. Israel has two refineries with a combined capacity of around 300,000 b/d and relies solely on imported crude as it has no domestic production. The majority of this oil is supplied by Russia -- mainly Urals grade from the Black Sea -- and Azerbaijan, with supplementary barrels from West Africa and the US, among other suppliers.
—Read the full article from S&P Global Platts
Rising unemployment, coronavirus cases push crude oil prices down
Rising US jobless claims and ongoing concerns about a slow economic recovery from the coronavirus pandemic combined to push crude oil prices down Aug. 20, even though OPEC+ expressed optimism about stronger oil demand by the end of 2020. Shorter-term pessimism, though, continued to keep crude prices relatively rangebound as front-month NYMEX WTI has mostly floated between $40/b and $43/b since early July. Both the Federal Reserve and OPEC+ cited recovery woes on Aug. 19. The next day, oil prices initially appeared to be in for a steeper daily fall, but ended with a more modest dip.
—Read the full article from S&P Global Platts
Written and compiled by Molly Mintz.
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