Posted on 02/22/2023 5:14:14 AM PST by george76
A growing number of office landlords are defaulting on loan payments as the rise of remote work causes more corporate tenants to rethink long-term leases...
The delinquency rate on office loans increased by a quarter percentage point to 1.83% last month .. While the number is still relatively low, the increase was the sharpest of its kind since December 2021.
...
The shift away from traditional offices has impacted major firms. Brookfield Asset Management recently disclosed a default on more than $70 million in debt on two office towers in Los Angeles.
In Manhattan, real estate firm RXR is reportedly working with creditors to restructure debt on its office building at 61 Broadway. Last year, Blackstone Group, one of the Big Apple’s biggest landlords, handed the keys to 1740 Broadway back to its lenders while transferring a $308 million loan on its office building to a special servicer.
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Corporate landlords are losing tenants even as a recent surge in interest rates makes it more expensive to buy or refinance properties.
The problem could get worse in the months ahead. Each month, an additional five to 10 office buildings are added to the list of properties at risk of a default on debt obligations — with low occupancy a chief cause
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Many US companies have adopted a hybrid schedule as part of their return-to-office pushes, with employees expected to work on-site anywhere from two to four days a week. Some firms, such as Airbnb, have gone fully remote, while others, such as Goldman Sachs, have pushed staffers to return to the office five days a week.
Last week, Bloomberg reported that remote work was expected to cost Manhattan $12.4 billion per year in lost revenue from worker spending.
(Excerpt) Read more at nypost.com ...
Who thinks this wasn’t predictable?
Oh. SO predictable . . . and, somewhat gratifying to those of us in rural “fly-over country.” We are the ones who generally bear the brunt of lib policies.
My heart bleeds for the commercial landlords.
My heart bleeds for Manhattan.
Okay then, back to remote work.
Wonder how this is affecting tax revenue in NYC, and when city ‘leaders’ will respond by raising and/or creating new taxes?
The property tax is New York City’s largest source of revenue. It is projected to generate $24 billion in fiscal year 2017, or 44 percent of all City tax revenues and about twice as much as the second largest source, the local personal income tax.
Empty offices and apartments is not a good sign NYC......
When Snake Plissken gets there things will straighten out.
Here in Los Angeles, all the high rises are pretty empty, working 50/50 between home and office is now the norm. 2 Big Buildings went into default yesterday
Democrat voters?
(If Lincoln had Democrats like these, he wouldn't have needed to hire Sherman to burn down their cities.)
I don't see this operating model lasting for long. The natural progression is likely to be toward either end of the spectrum: fully remote work or fully on-site work.
Leasing, building out, and equipping an office that is only used for 2-4 days out of a seven-day week makes absolutely no sense.
And home sales fell for the 12th straight month. January sales fell 36.9% from a year earlier.
Isn’t the Biden economy the greatest ever?!
A few thoughts:
AlGore should never have invented the internet.
As the massive cities run by democRATS become more and more unlivable, empty buildings could be boarded up and abandoned. The bums will squat in some of them. Science fiction will again become science fact. Once an area is abandoned, nature will begin to take over. Will Smiths will roam the streets, as modern hunter-gatherers.
Also, FTA: “”while transferring a $308 million loan on its office building to a special servicer.
...”” ‘Special Servicer?? Why does the name Guido come to mind?
Also FTA: “”remote work was expected to cost Manhattan $12.4 billion per year in lost revenue from worker spending.””
The phrase ‘cost Manhattan’ reminds me of the liberal mindset, that all money is theirs; by virtue of their existence, and their good intentions, all money should be owned and controlled by them.
They’ll be just fine. 5 million illegals a year (likely double that) need a place to live, for free.
Didn’t the democrats say illegal immigration is a boon to the economy?
Depends on your definition of “economy”. When it’s getting the taxpayer to fund all your dreams, well I guess so....
Its only going to get worse. Already companies are having a very tough time forcing workers with any leverage back to the office. As these leases gradually expire, you’ve got to think the push to get everybody back to the office will die down. Companies simply won’t renew the leases and will pocket the cost savings.
I think commercial real estate is going to be in the hurt locker for some time to come. They’re gonna need to convert a lot of those buildings to residential use.
Yep, office buildings will go first floor retail and upper floors housing, it's been the rage for a decade now.
Companies will of course go to hoteling to reduce office space. Several big banks do that. You don’t have a permanent cube. You reserve which cube you will be in - and you can only reserve a cube 2 weeks in advance.
Of course this begs the question of - “why come in at all then?”
Called this back in 2020, when it became clear the 2 weeks to bend the curve was utter BS.
Lower productivity. I think people feel their wages are not keeping up with inflation so their work pay is decreasing so they simply work less for the same amount of money to make up for it. Add to that that woke corporations no longer value employees as the bottom line is paramount, and you get no loyalty and less work/productivity, it's called quiet quitting.
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