In Indianapolis, the technology giant Salesforce is paring back a quarter of its office space in the tallest building in Indiana, where it has been a key tenant for the past six years. In Atlanta, the private investment giant Starwood Capital defaulted on a $212 million mortgage on a 29-story office tower. And in Baltimore, a landmark building sold for $24 million last month, roughly $42 million less than it fetched in 2015.
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All across the country, downtowns, office spaces and shopping centers are at risk of becoming ground zero for a new economic hazard: the urban doom loop. The fear is that a commercial real estate apocalypse could spiral out and slow commerce, wrecking local tax revenue in the process. Ever since the pandemic drove a boom in remote work, hubs such as New York and San Francisco have drawn attention for their empty offices in previously bustling skyscrapers. But many economists […]
Important to note this with the recent Fed actions holding rates and the down-rating of several regional banks a few weeks ago.
The Fed has worked hard over the past few years to penalize smaller regional banks who have been managed relatively well, to the advantage of the larger national players who are “to big to fail”. The larger players have been able to get away with on-going criminal activity, only paying fines, never admitting wrong doing, with no executives going to jail. The Fed action actions increase market concentration in the banking sector increasing costs for consumers, and boosting profits for the larger players, and making it less likely the “big boys” will be held accountable for their actions.
So there will be Real Estate corporations, invested in center city areas, who will take a bath as they are unable to pay their mortgages. Isn’t this the way capitalism is supposed to work? Those companies holding Real Estate that is under water will have to sell assets at discount prices opening opportunity for others. That opportunity may be the conversion of former office space into housing or medical treatment centers. The doom is for those who have mis-invested, not necessarily the society as a whole.