The commercial real estate industry is facing a crisis due to the pandemic's impact on the office sector, and you can help prevent its demise!
Office towers in the heart of major cities, considered to be the gold standard of commercial real estate, are now facing a supply glut and plummeting values. Industry experts are warning of a potential collapse, which could drag regional banks down with it. Commercial real estate lobbyists are urging regulators not to take actions that could worsen the situation, such as tightening credit unnecessarily or foreclosing on properties, which could trigger an economic downward spiral.
Landlords acknowledge that in-person work will never return to pre-pandemic levels, leading to a supply glut in the office sector. Despite office occupancy indicators remaining stable, tenants on long-term leases have yet to make final decisions on how much space they need, and most will require less. Office real estate values have dropped by 25% in the past 12 months, and a study estimates that permanent shifts in work habits have destroyed $413B of value for the overall US office market.
The industry is seeking solutions to mitigate the damage to not just CRE but the broader economy, including office-to-residential conversions. However, such transformations are tricky to finance, even in simpler times. Industry groups are lobbying Congress for financial support or incentive programs for conversions.
$270B in commercial real estate debt is scheduled to mature in 2023, an all-time record. Office buildings account for $80B, or around 30%, of this year's maturities. Refinancing is all but impossible after a year of the fastest interest rate hikes in Federal Reserve history. Several office-owning REITs, were given negative rating outlooks by S&P Global Ratings on Friday.
The long-term existential crisis of suddenly obsolete urban office towers will significantly impact central business districts, turning at least a few big buildings in every major city from key sources of tax revenue to potential blight magnets. The industry is urging Congress for financial support or incentive programs for office-to-residential conversions to mitigate the damage.
The office sector is facing a crisis that could drag regional banks down with it. The industry is seeking solutions, including office-to-residential conversions, to mitigate the damage.
Congress is now being lobbied for financial support or incentive programs for conversions to prevent the collapse of the commercial real estate industry.
You can help! Call your congressmen/women and let them know you are a concerned citizen. It's super simple and painless. Google search your two state senators and the house representative for your district. All you have to do is call the number, and an assistant will answer and ask how you can help and in most cases you’ll leave a message. Let me them know you believe congress needs to act now to help prevent a meltdown in the commercial real estate sector. The industry is lobbying for support for office-to-residential conversions so…you could mention that. At this point you can help raise awareness of an issue that could potentially blow up the commercial real estate industry, which would eventually cascade into the entire economy.
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