Dr. Gleb Tsipursky – The Office Whisperer
Nirit Cohen – WorkFutures
Angela Howard – Culture Expert
Drew Jones – Design & Innovation
Jonathan Price – CRE & Flex Expert
What’s going on:Â Â
Investors and regulators, on high alert due to recent bank failures, are now taking a closer look at the slumping US commercial real estate market, which is worth $20 trillion. Â
The commercial real estate market has taken a huge hit in the past few months, with US prices plummeting by a staggering 15% from their previous high in March.Â
Hybrid and remote work continues to be a dominant force in America, leaving building owners with the challenge of reduced rental income. CNN Business reports that the average occupancy of offices in the US is lagging behind pre-pandemic numbers, hovering below 50% of March 2020 levels.Â
This year, approximately $270 billion worth of commercial real estate loans are due. Whether they will be paid back is the pressing question. Â
Why it matters:Â Â
With interest rates soaring, lenders to this sector are struggling, causing a drastic drop in office buildings’ values. This spells out more trouble for banks and could have disastrous ripple effects.Â
If fear of inadequate bank lending to commercial real estate takes a turn for the worse, this may cause customers to suddenly withdraw their funds, which is exactly what happened with the Silicon Valley Bank last month.  Â
The European Central Bank and Bank of England have recently raised the alarm about the risks associated with commercial real estate investments as its market outlook becomes increasingly grim.  Â
How it’ll impact the future:Â
Jamie Dimon, America’s top banker and CEO of JPMorgan Chase has said that he couldn’t confidently predict whether additional banks will go bust this year; yet he made sure to emphasize that the present crisis is nothing like the global financial turmoil of 2008. Â
The most probable outcome in this situation will be an increase in loan defaults and reduced financing availability for the commercial real estate sector.Â
