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Moody's Predicts 24% Of Office Towers Will Be Vacant By 2026
[ZeroHedge] A new report from Moody's offers yet another grim outlook that the commercial real estate downturn is nowhere near the bottom. Elevated interest rates and persistent remote and hybrid working trends could result in around 24% of all office towers standing vacant within the next two years. The office tower apocalypse will result in more depressed values that will only pressure landlords.
What about the return-to-the-office trend? Many companies are doing that, too.
"Combining these insights, with our more than 40 years of historic office performance data, as well as future employment projections, our model indicates that the impact on office demand from work from home will be around 14% on average across a 63- month period, resulting in vacancy rates that peak in early 2026 at approximately 24% nationally," Moody's analysts Todd Metcalfe, Anthony Spinelli, and Thomas LaSalvia wrote in the report.

In a separate report, Tom LaSalvia, Moody's head of CRE economics, wrote that the office vacancy rate's move from 19.8% in the first quarter of this year to the expected 24% by 2026 could reduce revenue for office landlords by between $8 billion and $10 billion. Factor in lower rents and higher costs, this may translate into "property value destruction" in the range of a quarter-trillion dollars.

In addition to remote working trends, Moody's analysts pointed out that the amount of office space per worker has been in a "general downward trend for decades."

At the peak of the Dot-Com boom, office workers used an average of 190 sq ft. The figure has since slid to 155 sq ft in 2023.

Posted by: Skidmark 2024-06-29
http://www.rantburg.com/poparticle.php?ID=702599