Posted on 04/05/2023 5:51:32 AM PDT by EBH
After the banking crisis, could the next domino be all those empty office buildings in your downtown? Investors and economists are sounding the alarm about the commercial real estate market, seeing trouble ahead with refinancing. This sector has been hit hard for years now with the shift to remote work bringing about rising vacancy rates and falling property values. For her part, Lisa Shalett, the chief investment officer for Morgan Stanley Wealth Management, and strategists, sees a “huge hurdle” ahead.
Alarmingly, Shalett notes that regional banks accounted for 70% to 80% of all new loan originations in the past cycle, with all eyes on the sector after the historic implosions of Silicon Valley Bank and Signature Bank last month. She said office properties were already facing “secular headwinds” from remote work, and now sees a wipeout with vacancy rates close to a 20-year high: “MS & Co. analysts forecast a peak-to-trough CRE price decline of as much as 40%, worse than in the Great Financial Crisis.”
As Fortune has previously reported, tighter lending standards for the commercial real estate market are now likely. In fact, stricter lending standards were already in place with the Federal Reserve raising interest rates in its attempt to lower inflation, and the banking crisis will only exacerbate the existing lack of liquidity. That in turn, will increase the risk of defaults, distress, and delinquencies as the industry is largely built on debt, experts previously told Fortune.
And what of the wider impact on the economy? While Shalett sees a soft landing still possible, she says the odds of that happening are decreasing in light of the likelihood of tighter lending standards.
(Excerpt) Read more at msn.com ...
One of the issues is that you face circumstances in rural areas that don’t exist in dense populations area including slow internet if you can get it at all because they still use copper lines and a lack of cell service.
Fire insurance can be unavailable due to the distance to a fire dept. So don’t count on getting a mortgage if you can’t buy property straight out.
But wait! There’s more!
Have you considered some places have off the scale meth use with the attendant theft?
I want to live in the observatory of the Empire State Building, where I will run my total legitimate evil empire.
You are looking at this from the company’s perspective.
Try revisiting it from the employee’s perspective:
—Commuting costs time and money
—On site supervision means greater control by management. Lots of folks would like more independence during their day.
—On site means lots of meetings—most of them stupid—many of them just ego stroking exercises for managers
—On site means more claims of sexual or other harassment—why take the risk.
—On site often means noise levels are high—who needs that?
—On site in cities means a risk of crimes against person and property. Who wants to deal with that?
I am retired now, but I would gladly have turned down promotions if it meant I had to be in the office every day.
I was allowed to work mostly at home in the last few years of my employment—once you have done it going back to the office is just unthinkable.
Broke banks owning a bunch of buildings without tenants. Probably doesn’t bode well for the banks’ ledgers’ assets.
The government has the money to bail them out...the great reset will adjust values on everything.
Gonna be painful for all.
This has been absolutely predictable since they started the scamademic.
Of course I’m looking at it from the company’s perspective. It is their company; their hiring/firing decision; their job that they are creating and making available. If the employee does not like the conditions of employment, they’re free to work somewhere else that comports with their sense of obligation to their employer.
I’ve worked in both office and home-office situations. I personally loved working at home. As you note, I had no commute, lower personal expenses, and certainly fewer B.S. meetings (except annual “compliance” calls we had to sit through, remote or not). I also was more productive. But I also knew the employer could change their mind on this arrangement at any point, and I’d have to conform.
NYC offices have started to move to Charlotte.
You can also work a side gig from home. Which is what a lot of people are doing.
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