A different week, but largely the same, as commercial real estate continues to be hit by high interest rates and rising vacancies.
Goldman Sachs warned last week that Vornado Realty Trust may be on the brink of default Loans worth $2.6 billion.
In addition to rising interest costs and tenant departures, the REIT has $500 million in charges associated with its massive redevelopment project Around Penn Stationall of which could push Vornado’s debt coverage close to its limit, analysts wrote in a May 1 note.
Some are more optimistic about current market conditions.
Brookfield CEO Bruce Flatt tries to Reassuring investors about the state of the commercial real estate market In his Q1 letter, the Financial Times ReportThe letter comes as Brookfield is showing some distress of its own, particularly in the office market.
Concerns surrounding commercial real estate are overblown, Flatt wrote. He noted that much of the distress that has been seen revolves around older properties or properties that are already in distress.
“Parts of the real estate market are doing very well today — including hotels, industrial real estate, prime retail, prime office and multifamily,” he wrote.
Maybe, but that hasn’t stopped others from exploring ways to adapt to current conditions.
in Manhattan, Family offices and small investors are trying to fill the voidaccording to Bloomberg.
In the second half of last year, 11 office deals in Manhattan closed for at least $50 million. Of these, seven had family offices or non-institutional investors as buyers. During the first half of that year, those entities bought almost nothing.
“One man’s trash is another man’s treasure,” Marisa Clinton, senior director of Northeast research at Savills, told Bloomberg.
Meanwhile, officials and developers in San Francisco, like those in many U.S. cities, Are turning to other solutions, such as converting vacant office space into housingHowever, the situation is particularly bad in the city of Marina Bay, where a third of offices are vacant and office card swipes are less than half of pre-pandemic levels.
But analysts say high vacancy rates and a recent push to reduce zoning codes and fees are likely to lead to any actual conversions, and it will take a concerted effort by the government and developers to make projects a reality.
According to several recent studies, a major advantage is that the city has many older, smaller office buildings that are more suitable for renovation than other markets.
South Florida is much more sunny, where ssome Tri-County Area’s Largest Employer Is Giving Up Some or All of Its Office Space. Developers are buying up less desirable campuses with plans to demolish and build in-demand asset classes such as industrial and residentialAl.
