Offices: how bad will the property crunch be?
This is compounded by the longstanding anxieties around retail due to the move from bricks and mortar to more online shopping.
- This is compounded by the longstanding anxieties around retail due to the move from bricks and mortar to more online shopping.
- Charlie Munger, Warren Buffett’s right-hand man, has warned of a major pullback in lending to commercial property.
- He argues that American banks are full of bad loans associated with previously lucrative assets.
The changing market
- Factory demand is up by nearly a third year on year from businesses “nearshoring” in response to heightened geopolitical tensions.
- Across the board, there’s always some churn in commercial vacancies as the market ebbs and flows.
- Underlying these concerns are disruptions in the market.
- Ever since it became easier to invest in commercial property in the 1960s, the market was landlord-led.
Where we’re heading
- The same goes for those with poor sustainability ratings, long leases and few nearby shops and childcare amenities.
- Single-use locations like Canary Wharf and office parks dominated by traditional grid-like designs are at most risk because they are least appealing and don’t lend themselves to adaptation.
- Buildings like these are becoming stranded assets, not just because of their physical attributes but also because no one really knows what they are worth at the moment.
- If lenders allow some leeway during this transition rather than foreclosing aggressively, hopefully the worst pain can be avoided.