Donna Abood’s Post

Once that lease is signed, this concept of financial health AND willingness to spend it on building maintenance of systems like Fire Spinklers, Fire Alarms, Smoke Evac systems, elevators, mold remediation and HVAC not to mention property management staff become major issues that often hit the tenants pocket. Especially if it’s a full floor tenant or a tenant buildout in a building that has not had a significant PERMITTED project in the last two years. All those skeletons will come out during inspections and it will cause major impacts on both schedule and the budget. If you go into a building with a landlord and stressed/overworked property management team that is lax on their Maintenace, understaffed and plagued with poor leadership or questionable ethics and un-permitted work, you’ll be in a world of trouble. Thats why we as the tenant rep project manager, like to join our clients in their building tours during the search and LOI stage - we can use our insider knowledge about the building to help set you up for success through a budget and schedule that accounts for these wild cards. And big tip: use our insider knowledge to negotiate higher tenant improvement allowances. The Common Area provides a deeper level of boutique owners rep services and that’s how we find success for our clients but it starts with an rockstar expert broker like Donna Abood and her team. ⭐️🙌

🏢 Office-building owners have been under pressure since the Covid-19 pandemic hollowed out their buildings in early 2020. According to data from real-estate consulting firm Colliers, the U.S. vacancy rate has risen from 11% in late 2019 to 17% today, higher than at any point in the 2008 global financial crisis. But forced sales are still surprisingly rare. In 2023, only 3.5% of all office deals in the U.S. involved a distressed seller, based on analysis by MSCI Real Assets. The most recent numbers available show the share slipping to 2.7% in January. Distressed sales ramped up much faster in the GFC. A strong economy is helping to delay the day of reckoning, as most tenants are still paying the rent. Pressure is building slowly as leases expire: Many companies are reducing their space by 30% to 40% when their contracts end. Lenders are also eager to kick the can down the road. They don’t want to force borrowers to sell buildings into a weak commercial real-estate market, which would lead to punishing losses. This might explain why debt maturities aren’t triggering the kind of distress that some property watchers expected. Of the $35.8 billion of office loans that came due in the commercial mortgage-backed securities market last year, only a quarter were paid off in full, according to data from real-estate analytics firm CRED iQ®. Other loans were extended or sent to a special servicer—a third party that tries to find the best outcome for the debt, which may include modified payment terms or foreclosure. Distressed-debt investors might slow the pace of forced sales in a handful of cases, but the office sector’s need for finance will soon massively outstrip supply. CBRE thinks U.S. office landlords face a $72.7 billion refinancing shortfall between now and the end of 2025. A flood of “For Sale” signs looks inevitable, but they are taking longer than expected to arrive. ❓ If companies are reducing their space by 30% to 40% when their contracts end, what are your predictions for the future of corporate real estate? Keen to hear your insights and ideas. 🙏 https://lnkd.in/gvhqjSaZ WorkFLEX-Australia #hybridwork #wfh #workfromhome #futureofwork The Wall Street Journal Author: Carol Ryan

🏢 Are You Prepared for a Severe Office #Property Market Shift? The real estate landscape is on the brink of change, and it's essential for #investors and #professionals to stay ahead of the curve. According to this eye-opening article, experts are warning of a severe crash in US office properties. From #remote work trends to evolving office space demands, this article unveils the key factors shaping the future of commercial real estate. Don't miss out on the #opportunity to adapt and thrive in this evolving market. Discover strategies to navigate the impending shift and make informed decisions. Share your thoughts and join the conversation about the future of office properties in the comments below! #RealEstate #OfficeProperties #MarketShift #InvestmentStrategy #FutureOfWork #Financialadvisor #wealthmanagement Read more: Bloomberg, Bloomberg News, @Scott Carpenter, Sarah Holder https://lnkd.in/gy7KeMex

Tough Times Ahead for Office Real Estate 🏢💼 Recent reports indicate that commercial real estate is in for a challenging journey ahead. Bloomberg's Markets Live Pulse survey predicts at least nine months of declines in the U.S. office market, with expectations of a rebound only after a significant setback. For the $1.5 trillion of commercial real estate debt due by the end of 2025, this poses a significant challenge. Rising interest rates and the persistently low occupancy rates of office workers, especially in the U.S., are driving commercial real estate prices down, with nearly half of the survey respondents foreseeing rock-bottom prices by the end of 2024. In these uncertain times for commercial real estate, it's essential for investors and industry professionals to stay agile and adapt their strategies. I'd love to hear your thoughts on where the commercial market is heading. Please comment below and let's navigate this challenging landscape together, sharing insights and ideas! 💬 #CommercialRealEstate #RealEstateMarket #ShareYourThoughts

We examine the post-pandemic challenges facing the commercial office space market, and the potential economic impacts of recent trends.

We examine the post-pandemic challenges facing the commercial office space market, and the potential economic impacts of recent trends. #commercial #globalinsight

The bubble appears to be leaking....not quite ready to burst. B and C quality office properties see no way out of the new ways of work. “There is a lot more trouble coming,” said Mark Silverman, a partner and leader of the CMBS Special Servicer group at the law firm Locke Lord, who represents lenders in disputes with commercial mortgage borrowers. “If we think it’s bad now, it’s going to get a lot worse.” In May, insurance companies and banks in the top-rated, triple-A bond of a commercial mortgage-backed deal — generally considered nearly as safe as a government bond — lost $40 million, or about 25 percent of their investment. Holders of lower-rated bonds from the same commercial mortgage deal lost all of the $150 million they had invested. Rich Hill, head of real estate strategy and research at Cohen & Steers, an investment firm. “But we’re not at the bottom yet.” Hill believes it won't be until sometime in 2025 before the scale of the problems becomes clear. Only then can a "bottom" be estimated. Adding to the uncertainty is the fact that a "normal" recovery cannot happen as the workplace has expanded far beyond the legacy office. Long term demand outside of the very best new buildings will likely remain soft for an undetermined period.

Office prices in the US are due for a crash, and the commercial real estate market faces at least another nine months of declines, according to Bloomberg’s latest Markets Live Pulse survey. About two-thirds of the 919 respondents surveyed by Bloomberg believe that the US office market will only rebound after a severe collapse. An even greater majority says that US commercial real estate prices won’t hit bottom until the second half of 2024 or later. That’s bad news for the $1.5 trillion of commercial real estate debt that according to Morgan Stanley is due before the end of 2025. Refinancing it won’t be easy, particularly the roughly 25% of commercial property that is office buildings. A Green Street index of commercial property prices has already fallen 16% from its peak in March 2022. Commercial property values are getting hit hard by the Federal Reserve’s aggressive tightening campaign, which lifts a key cost of owning property — the expense of financing. But lenders looking to offload their exposure now are finding few palatable options, because there aren’t many buyers convinced the market is close to a bottom. Pain from higher interest rates can take years to filter through to owners of the US commercial real estate, which Morgan Stanley values at $11 trillion in total. Investors in office buildings, for example, often have long-term fixed-rate financing in place, and their tenants can be subject to long-term leases as well. It will take until 2027 for leases that are in place today to roll over to lower revenue expectations, according to research by Moody’s Investors Service published in March. If current trends hold, then revenues by then will be 10% lower than today. “It tends to be a slow reckoning for US real estate when rates change,” Barclays’s Overby said. “And the office sector is deeply distressed, which will take a long time to work out.”

https://lnkd.in/gwWhgW-J The low occupancy rate is a ticking time bomb for owners of office buildings. When leases expire, tenants won’t want as much space as they have now. Vacancy rates will shoot up. We’re already seeing that happen. Last month Moody’s Analytics announced that the national office vacancy rate rose in the fourth quarter to 19.6 percent, breaking the record of 19.3 percent that was set in 1986 after a period of overbuilding and was then tied in 1991 during the savings and loan crisis.

We examine the post-pandemic challenges facing the commercial office space market, and the potential economic impacts of recent trends.