US office owners get dire warning that a rebound is unlikely before 2040
US office buildings are unlikely to regain their peak pre-pandemic values until at least 2040 as demand for desk space weakens, according to a forecast by Capital Economics.
Values are expected to plunge 35 per cent from the peak by the end of 2025 and take an additional 15 years or more to recover as hybrid and remote work reshape real estate, the London-based research firm reported on Thursday (Jun 22).
It’s a trend that mirrors the collapse of shopping malls as e-commerce grew.
“Demolitions and conversions of the worst assets may partially counteract the impact on valuation-based indices,” economist Kiran Raichura wrote.
“But ultimately landlords will have to bear those costs, so the road ahead for office owners is set to be an arduous one.”
Major institutional investors, including Brookfield Corp and Blackstone Inc, have already defaulted on some office buildings, choosing to stop loan payments rather than spend more on money-losing properties.
About US$18 billion of office buildings were considered distressed at the end of March, MSCI Real Assets said in a report on Thursday.
It estimated that almost US$43 billion of offices are at risk of default. BLOOMBERG
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