America’s commercial property collapse is becoming a danger to the financial system.
Office blocks purchased with debt remain half empty, 18 months after the end of the pandemic. Thousands of buildings will have to be torn down. Hundreds of regional banks are sitting on crippling losses that they yet to acknowledge.
“It’s a trainwreck in slow motion,” said Professor Stijn Van Nieuwerburgh, a property and finance expert at Columbia University.
“The return to the office isn’t happening. Data from turnstile swipes shows that occupancy levels are still just 49pc of where they used to be. It has been stable for a year and a half,” he said. Sensors tracking physical presence in offices tell the same story. Hybrid work is here to stay.
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DT (£) A rising wave of property defaults threatens US banks. “We are starting to see distressed sales every day. Offices are selling for 50pc, 60pc or 70pc discounts. At these values the equity holders are wiped out, and lenders take a 30pc loss,” https://t.co/3JGKK29ku4
— Peter Bill (@peterproperty) October 27, 2023