There are more dormant office towers in the United States than at any point since 1979, according to a new report from Moody’s Analytics, which began tracking office leasing vacancies that year.
The rising supply of office space is due to a combination of surging remote and hybrid work that forces companies to reduce corporate footprints. Also, companies are exiting imploding progressive cities and high-taxed blue states for red ones while downsizing space.
In the report, office tower vacancies rose to a record 19.8%, up from 19.6% in the fourth quarter of 2023.
Even with the increase, there is an eerily calm across the commercial real estate sector. This comes as the Federal Reserve’s interest rate hiking cycle is higher for longer, indicating that the pain train is nearing (perhaps after the presidential election).
“The office stress isn’t quite done yet,” Thomas LaSalvia, Moody’s head of commercial real estate economics and one of the authors of the report, told Bloomberg in an interview. He noted recent positive economic indicators stave off a “perfect storm in the office sector.”
“There are spots of light and there are spots of extreme darkness,” LaSalvia said, adding, “This is part of a longer-term evolution where we are seeing obsolete buildings in obsolete neighborhoods.”
The high office vacancy rate continues to be terrible news for landlords and developers eager to fill their buildings, and the Fed’s hiking cycle has made refinancing very challenging.
Last month, Goldman’s Vinay Viswanathan penned a note explaining how “office mortgages are living on borrowed time.”
Viswanathan said there have been no major fireworks in CRE tower debt because the debt is being “extended and modified rather than refinanced,” which “mitigates a default wave and a sharp pick-up in losses on CRE loan portfolios.”
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How long can the mods of these loans go on? Eventually the debt owners want their money.
More can kicking
Look at the absolute Ponzi of US finances and I will say it can go on longer than you can imagine.
Yes, as long as needed, until its owners say, “Pull it!”
https://911planeshoax.com/
They overbuilt on the premise that we would grow forever. Anyone bothering to analyze what was actually happening , knew the politicians were trying to destroy us , knew they had overbuilt , and that a collapse was coming.
It all started with covid shutdowns. Just think of all the small businesses that went out of business. All to make Trump look bad. They are truly insane.
They’re utterly sane. It is premeditated crime.
Fill them with “guests “,lock the doors and watch the fun !….
Bowie, half a century ago:
.
.
.
The Machine Stops, by E. M. Forster (1909)
https://www.cs.ucdavis.edu/~koehl/Teaching/ECS188/PDF_files/Machine_stops.pdf
Eventually they’ll be turned into illegal scum housing.
Soviet style. You get a room, a curtain and share the kitchen and bathroom.
bathroom?
They just piss in the halls, the non working elevator, shit in the stairwells. Don’t need bathrooms, it’s one more room to not clean.
South African style where the elevator shaft becomes the latrine.
Only about 3% above the ten year average. Really not so bad. Heard a lot of doom about it but if they’ve been getting along the last ten at nearly this rate they ought to be, if not fine, at least OK
…FREE! housing for Illegal Aliens
Make sure You pay your taxes, else fine/imprisonment. Or Worse.
Office CRE Mess Keeps Getting Worse, Massive Repricing Underway
Availability rates in the office sector of Commercial Real Estate (CRE) are not getting any better, and in many markets, they’re getting still worse and are hitting new records, as landlords and lenders grapple with waves of massive repricing, with office tower values, those towers that have sold, plunging by 40%, 50%, 60%, 70% and more. Numerous landlords, from Blackstone on down, have let buildings go back to lenders to let them deal with the mess.
Here is a chart of the 13 markets for which Savills released the Q1 data today, showing the availability rates of office space, so that’s the space that has been put on the market for lease either by the landlord directly or by a tenant as a sublease. Red shows the availability rates for Q1 2024; gray for Q1 2021, and blue for Q1 2019, which were the Good Times.
Who is on the hook? For some office mortgages, banks are on the hook, including foreign banks. But lots of the loans that have spectacularly blown up were held by investors not banks, by holders of commercial mortgage-backed securities (CMBS), mortgage REITs, PE firms, life insurers, holders of collateralized loan obligations (CLOs), etc.
Downtowns in blue cities are doomed. Work from home and the pandemic chased workers from the downtown office buildings. High taxes in the blue zones forced smart people and companies to leave the blue states.
Since the demand for downtown office space is now zero and modern downtown office buildings cannot be economically retrofitted to residential, empty downtown buildings will multiply like illegals at the border during a democratic administartion. Then the owners of the ghost builders will walk away from loans leaving the buildings abandoned.
At that point the homeless and squatters and fentanyl zombies will start taking them over. Then every blue downtown will start to look like downtown Johannesburg. On the plus side, you can put a voting precinct in the lobby and ensure the blues continue running these cities in the the ground.
Praise the Lord we don’t live in that shit and may God bless those stuck in that shit they come out.
I used to deliver to a 5-tower office complex, among others, almost daily.
Before covid, it had probably a 70% or better occupancy rate.
After the lockdowns, 40 % would’ve been optimistic.
The mailman I occasionally ran into, thought it 20%.
Meaning that all the tenants could conceivably fir into one tower, and leave the other 4 to get re-developed for illegal invader housing.
So where are all the crying whining CEO’s that have been broken by the government?
Oh,wait……..yeah they were ALL IN ON IT!.
Fuck em’ and feed em’ fish heads!….
You mean feed em to the fishes
House illegals like a warehouse and the decision to tear them down is moot.
Keep them out of private property owners backyards and houses. They are illegals, not pets.
However, that is not their plan.
Anyway, why don’t illegals just take them over and move in by the hordes.