(Bloomberg) — The world’s biggest real estate investors are sitting on piles of cash, preparing for once-in-a-lifetime opportunities created by the pandemic. With economies around the world sputtering, commercial real estate prices are expected to come down. How much they’ll fall is the key question. Sellers are currently willing to concede discounts of around 5%, while bidders are hoping for
A rising number of office- and apartment-building owners are falling behind on their mortgages, a sign the economic shutdown is harming stabler property types and raising the prospect of widespread industry damage.
Office leasing has mostly dried up in recent weeks and companies increasingly say they want to use less office space in the future and let more employees work remotely. At the same time, the economic and business collapse is leaving many people unable or unwilling to pay rent for their apartments.
Owners of hotels and retail properties were the first to run out of money and start to default back in March, but those types of real estate already looked vulnerable. Hotels are the most economically sensitive because of their short-term stays and easy cancellation policies. Shopping centers were already under assault from e-commerce before malls started to shut down under government orders.
Offices and rental apartments seemed safer bets. Because office properties have long-term leases backed by corporate guarantees, income hasn’t fallen as quickly. And people always need a place to live.