Decreased Office Demand And Expiring Leases Could Spell Trouble For Landlords

Landlords are prepping for a spike in vacancies this year as the state of the office market remains unsteady. 

According to data from JLL, around 243 million square feet of office leases are expected to expire this year, which is a 40% increase from the levels seen in 2018. These lease expirations may also coincide with Green Street’s estimated 15% decline in office demand. 

Not only will landlords struggle, but banks and lenders could be forced to deal with problem loans if the performance of office spaces tumbles.  

For instance, global investment group Blackstone was forced to turn over its Midtown office space on 1740 Broadway where a $308 million loan was sent to special servicing, which is typically reserved for poor-performing or delinquent loans. 

With companies opting for shorter leases and smaller spaces, landlords could face more pressure than ever before.

“I don’t think the landlords have felt the pain yet,” said Jeffrey Peck, vice chairman of Savills. “Now they’re going to start feeling the pain.”