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The coming collapse of commercial real estate


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2023 Jun 26, 5:29pm   536 views  12 comments

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Excerpted from the article by Andrea Widburg The American Thinker

... commercial real estate is empty. Small businesses don’t renew their leases, and large businesses simply forfeit them. Building owners are walking away from mortgages, leaving their empty office towers to the banks, which cannot possibly find tenants for them. The result is that we are looking at a coming commercial real estate collapse that could make 2008’s home real estate recession look like a cheery block party:

Commercial real estate has become a debt timebomb, experts have warned, as office towers remain empty in once-bustling cities.

The new era of remote work means ‘zombie’ workspaces remain vacant - while higher interest rates make it more expensive to buy or refinance buildings.

Some $1.5trillion in real estate mortgages are due this year and next, bringing the market to a dangerous precipice. When the deadline arrives, experts warn owners may be forced to default instead of borrowing again to cover the bill.

Earlier this month, the landlords of downtown San Francisco’s Westfield mall stopped making mortgage payments on its $558million loan amid rising crime and tanking sales.

Meanwhile in New York, building owners are being forced to negotiate extensions on millions of dollars of debt after failing to secure financing.

According to building security company Kastle Systems, only about half of office workers in the Big Apple are back at their desks.

And a joint study from researchers at New York University and Columbia University found that offices in the city will lose 44 percent of their pre-pandemic value by 2029 because of the impact of remote work.

Across the country, values for offices have decreased by 27 percent since March 2022, according to data analytics company Green Street.

In 2008, with the home real estate collapse, the American economy still had some resilience. This time around, it does not, and the damage done to the financial system, when it starts radiating out to the employment sector, could be devastating. I have no advice whatsoever for how to weather the coming storm. It’s like watching a massive tornado heading your way and knowing that your storm cellar has already flooded. There’s no way out.

For the full article: https://www.americanthinker.com/blog/2023/06/the_coming_collapse_of_commercial_real_estate.html

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1   DOGEWontAmountToShit   2023 Jun 26, 6:50pm  

Cities impacted will have to engage in some aggressive rezoning and redevelopment incentives to convert these buildings into apartments and condos/coops pronto. And do it fast.

With a few exceptions, they won't. Just like they haven't for all the abandoned malls out there.
2   Patrick   2024 Aug 2, 11:48am  

https://www.coffeeandcovid.com/p/its-complicated-friday-august-2-2024


The controlled demolition of downtown New York City continues. Yesterday, the New York Times ran a sobering real-estate story headlined, “This 23-Floor Manhattan Office Building Just Sold at a 97.5% Discount.” Apparently, inflation hit everything else but missed big-city commercial real estate. The building in the story, which used to headquarter Sports Illustrated, last sold in 2006 —admittedly at peak market— for $332 million dollars. On Wednesday, it sold at auction for only $8 million, a stunning 98% discount.

The sellers accepted such a low price because 135 West 50th Street is two-thirds empty, and the rents from the remaining tenants aren’t even enough to cover the ground lease, which the building’s owner must pay to a different party that owns the underlying land. So when you add up the ground lease, the taxes, upkeep, and financing costs, 135 West 50th is losing money faster than a Boeing Starliner with a helium leak.

The Times grimly noted that New York’s real estate market has yet to hit bottom. It’s still falling from orbit, somewhere over Nebraska.

The City is also a big loser. Property taxes on an $8 million building are 98% less than taxes on a $332 million building. But the good news is that capitalism and free markets, if allowed to function, could easily cure this problem. A new owner with a much smaller mortgage would have the flexibility to find the building’s highest and best use.
3   AD   2024 Aug 19, 3:01pm  

Frank Lloyd Wright's high risk (called Price Tower) in northern Oklahoma

"The tower was sold in 2023 for $10 to Copper Tree Inc., which had planned to restore the building. By August 2024, the owners owed more than $2 million and were selling off the tower's furniture. As a result, the tower is closed effective September 1, 2024, amid financial issues and a dispute with the Frank Lloyd Wright Building Conservancy regarding the sale of the furniture"
4   FortwayeAsFuckJoeBiden   2024 Aug 19, 8:00pm  

they’ll bail it out. guys, the people with big money always get rescued. it’s you and i they look at with disdain.
5   zzyzzx   2024 Nov 19, 8:09am  

https://finance.yahoo.com/news/home-dying-nyc-offices-nearly-120015393.html

'Work From Home Is Dying' – NYC Offices Nearly Full As Workers Return In Droves
6   DOGEWontAmountToShit   2024 Nov 19, 8:21am  

zzyzzx says

https://finance.yahoo.com/news/home-dying-nyc-offices-nearly-120015393.html

'Work From Home Is Dying' – NYC Offices Nearly Full As Workers Return In Droves


Yup. Like this:

7   WookieMan   2024 Nov 19, 12:24pm  

zzyzzx says

https://finance.yahoo.com/news/home-dying-nyc-offices-nearly-120015393.html

'Work From Home Is Dying' – NYC Offices Nearly Full As Workers Return In Droves

My work from home.


8   DOGEWontAmountToShit   2024 Nov 19, 12:47pm  

WookieMan says

zzyzzx says


https://finance.yahoo.com/news/home-dying-nyc-offices-nearly-120015393.html

'Work From Home Is Dying' – NYC Offices Nearly Full As Workers Return In Droves

My work from home.





Trump working from home:


9   Patrick   2024 Nov 23, 7:03pm  

https://www.bizjournals.com/sanfrancisco/news/2024/11/18/blackstone-schwab-san-francisco-211-main.html


Blackstone sees value of Charles Schwab's former San Francisco headquarters at 211 Main fall by nearly half - San Francisco Business Times

Appraisers slashed the value of 211 Main St. by roughly half at the end of October, suggesting the building is today worth less than the debt Blackstone Inc. used to acquire it almost eight years ago.

The 17-story, 417,226-square-foot 211 Main was appraised at $152 million, or $364 per square foot, in October, according to CMBS data released this month. That is down from $294 million, or around $705 per square foot, when Blackstone (NYSE: BX) acquired the property in March 2017. The Manhattan-based investor took out a $195.2 million loan to support its acquisition of the building, which was then fully leased to brokerage Charles Schwab Corp. as its corporate headquarters.

The October appraisal comes a few months after Schwab, which relocated its headquarters from San Francisco to Westlake, Texas in 2019, officially put close to 230,000 square feet in the building up for sublease, shrinking its footprint there to six floors.


Lol! I worked in that building for about four years at Schwab. Schwab's a good company, but I'm happy to see Blackstone take a hit.
10   WookieMan   2024 Nov 24, 3:34am  

Patrick says

Lol! I worked in that building for about four years at Schwab. Schwab's a good company, but I'm happy to see Blackstone take a hit.

They won't take a hit. They take the losses and write it off. It's not a big deal for that large of a company. If anything it's a benefit to an extent. Less taxes on the profitable buildings. You win some, lose some. That's the real estate game, just need a good accounting firm.
11   Patrick   2024 Nov 27, 9:46am  

https://www.coffeeandcovid.com/p/the-un-resistance-wednesday-november


California’s controlled demolition continues, signaling why the fledgling Democrat Resistance is already doomed. Local KTLA ran a story yesterday headlined, “Downtown Los Angeles skyscraper loses 2/3 of value.” Last appraised ten years ago at $605 million, the Bank of America Plaza in downtown LA just appraised at only $188 million — having lost 66% of its value in ten years. It has defaulted on its loans. The building’s occupancy is terrible. What could have caused this? Hint:




This type of depressing headline is common for the Big Blue Cities. Still, Democrats will deny, they’ll try to wave away the Blue commercial market meltdown, blaming it on pandemic fatigue and worker’s changing preferences for spending their days working in pajamas instead of coming into the office.

But that is a lie. To prove it, I rounded up two more headlines to make a trifecta.

First, compare the real estate market in Los Angeles, California with the market in Miami, Florida. In July, the Financial Times ran a story headlined, “Cost of Miami office space hits record high. In the very first paragraph, FT provided readers with what I like to call a “clue:”

The cost of Miami office space hit a new record as demand from
blue-chip companies from New York, Chicago and Los Angeles for
high-end offices outstrips supply.

Apparently, for some reason, unlike Los Angeles, Miami’s commercial market has not been hollowed out by work-from-home policies. It is not suffering from pandemic fatigue. It is booming. And it is stealing LA’s blue-chip companies.

But, Democrats will wail, that’s just because it’s Florida, and Florida is an outlier. But pardonne-moi, mon ami. Not so fast. Let’s consider the next best red market or, tipping the cowboy hat as deserved, arguably the best.

Early this month, just a few weeks ago, Dallas Magazine ran a story headlined, “Dallas Named Country's No. 1 Commercial Real Estate Market for 2025. Here's Why.” Not only did this delightful story prove that a second Big Red City is also not suffering pandemic fatigue or having any pajama problems, but it helpfully provided the current list of the top ten commercial real estate markets. Ready? See if you can spot any common characteristics:

DFW has consistently been in the top 10 for six years, but this marks its
return to the top spot for the first time since 2019.
Miami ranked No. 2, followed by Houston, Tampa-St. Petersburg,
Nashville, Orlando, Atlanta, Boston, Salt Lake City, and Phoenix.

You see it. Except for Boston, all the top-performing real estate markets are all Red State Big Cities.

The commercial market metric is only one of many, although it is one of the clearest metrics and one of the most shocking. But when we look at other figures, we find similar trends. For example, consider this PEW Charitable Trust chart of states and their net migration changes:




See? The Red States win. Each new Red State citizen is a new taxpayer and a new contributor to the economy. And each one who’s moved means one fewer taxpayer and economic contributor from the Blue states of origin. The list of net loser states is a Blue wall of shame.
12   WookieMan   2024 Nov 27, 12:56pm  

Patrick says

See? The Red States win. Each new Red State citizen is a new taxpayer and a new contributor to the economy. And each one who’s moved means one fewer taxpayer and economic contributor from the Blue states of origin. The list of net loser states is a Blue wall of shame.

IL is young people moving. And retirees. Outside of winter it's not a bad state. I think our exodus has slowed though. I have buddies that could move tomorrow and don't.

I do have to say the ones willing to stay in IL are changing the state. It will take another decade, but IL could be a swing state. Dems are moving to places like ID and MT in the west so that won't move the needle. IL comes into play Dems almost 100% lose. It's inching that way.

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