2023/06/24 Liberty Times
U.S. commercial office building vacancy rates are climbing due to weak demand for office space due to hybrid work models. (Schematic, Bloomberg)
Capital Economics predicts that due to weak demand for office space due to hybrid work models, U.S. commercial office prices will plummet by 35% from their highs by the end of 2025, and will not have a chance to return to their pre-pandemic peaks until at least 2040.
Bloomberg reported that Capital Economics released a report on the 22nd, hybrid and remote working models to reshape the U.S. commercial real estate market, predicting that by the end of 2025, housing prices will plummet by 35% from their highs, and it will take 15 years or more to recover.
Economist Kiran Raichura said that for commercial landlords, the removal or sale of the worst assets could help offset some of the impact on asset values, but landlords will eventually have to bear these costs, and the road ahead remains bumpy.
The report pointed out that major institutional investors such as Brookfield and Blackstone have defaulted on some commercial offices, and they have chosen to stop repaying loans compared to investing more money in loss-making properties.
MSCI Real Assets also warned that about $18 billion worth of commercial office buildings were in trouble at the end of March, and nearly $43 billion was estimated to be at risk of default.
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