berg80
Diamond Member
- Oct 28, 2017
- 17,820
- 14,958
- 2,320
‘Ticking time bomb’: Plunging office values alarm Washington
Four and a half years after the pandemic sent workers home, the office property bill is finally coming due. The market for office buildings — already reeling from higher vacancy rates amid the rise in remote-work policies — has been crushed by high borrowing costs, and while the Federal Reserve is at last preparing to cut interest rates, it may be too little, too late. Investors, banks and property owners are now beginning to accept that some commercial buildings will never recover their pre-pandemic value, and that’s leading to a steady drumbeat of distressed sales.
The market’s troubles have caught the attention of Congress — with one New York lawmaker calling it a “ticking time bomb” for banks as nearly $1 trillion in commercial real estate loans are coming due this year. Faced with vacant office buildings and a shortage of millions of homes to meet demand, a bipartisan group of lawmakers is trying to make it easier for developers to convert underused properties into housing.
“This would absolutely help lenders recoup some of their investment while allowing them to align with the current needs of the market,” said Rep. Mike Carey (R-Ohio) who introduced a bill this summer establishing a temporary 20 percent tax credit for qualified property conversion expenditures. “The pandemic caused a seismic shift in work patterns,” said Carey, who offered the bill with Rep. Jimmy Gomez (D-Calif.). “We see these vacant office buildings as a well of untapped potential.”
https://www.politico.com/news/2024/09/02/office-property-values-fed-00174697
I recently read an article (can't remember where) stating the work at home trend that began out of necessity during COVID has staying power. Some businesses have ordered people back to the office but the impact on commercial real estate is nonetheless pretty severe. If you're thinking about investing in a REIT for the divi as bond returns fall think again.
Anyway, I'll take any encouragement regarding comity in Congress that I can get. This is what government working for constituents is suppose to look like and we need more of it.
Four and a half years after the pandemic sent workers home, the office property bill is finally coming due. The market for office buildings — already reeling from higher vacancy rates amid the rise in remote-work policies — has been crushed by high borrowing costs, and while the Federal Reserve is at last preparing to cut interest rates, it may be too little, too late. Investors, banks and property owners are now beginning to accept that some commercial buildings will never recover their pre-pandemic value, and that’s leading to a steady drumbeat of distressed sales.
The market’s troubles have caught the attention of Congress — with one New York lawmaker calling it a “ticking time bomb” for banks as nearly $1 trillion in commercial real estate loans are coming due this year. Faced with vacant office buildings and a shortage of millions of homes to meet demand, a bipartisan group of lawmakers is trying to make it easier for developers to convert underused properties into housing.
“This would absolutely help lenders recoup some of their investment while allowing them to align with the current needs of the market,” said Rep. Mike Carey (R-Ohio) who introduced a bill this summer establishing a temporary 20 percent tax credit for qualified property conversion expenditures. “The pandemic caused a seismic shift in work patterns,” said Carey, who offered the bill with Rep. Jimmy Gomez (D-Calif.). “We see these vacant office buildings as a well of untapped potential.”
https://www.politico.com/news/2024/09/02/office-property-values-fed-00174697
I recently read an article (can't remember where) stating the work at home trend that began out of necessity during COVID has staying power. Some businesses have ordered people back to the office but the impact on commercial real estate is nonetheless pretty severe. If you're thinking about investing in a REIT for the divi as bond returns fall think again.
Anyway, I'll take any encouragement regarding comity in Congress that I can get. This is what government working for constituents is suppose to look like and we need more of it.
