State collapse is inevitable when a society’s leaders are insulated from the negative consequences of their bad decisions.
Mike Shelby
I have been waiting for this to implode. So many companies have found they don’t need all their employees in a space every day so only about half the office space is needed than say before 2019-2020. My company for one has invested a lot in a space in a ritzy part of town, so they make us come in half time, but they have rented nowhere near enough to house all the workers as would have been the case in the past.
So too have I been watching for the implosion. And it isn’t just office space. There is a tour of retail space that is (and has been) sitting long term. Some of it is just not viable, it is obsolete and often in poor condition, thereby making it unfit to lease. There is also a lot of newer retail (strip malls particularly) that was built on spec, and has never seen full occupancy, some has remained “white boxed” with not a single tenant for years on end. While new construction in this segment has slowed down a lot over the last few years, there are still a few new projects going up.
The number of vacant properties along major commerical corridors has been on the increase. Near my home recently, a former Red Lobster that had been closed for 4-5 years was finally demo’d, and without a planned redevelopment filed. Meanwhile, an older automated carwash on the same stretch remains closed and deteriorating. But there are many such older restaurants and various retail properties that sit for years with no activity, and faded “for lease” signs out front. It amazes me the real estate taxes on these continue to get paid.
When the reckoning finally hits CRE, it’s going to be a spectacular blowout. I expect many bankruptcies of firms in that space, once they can no longer carry the cost of all the dead weight in their portfolios. This will hit the big banks to a significant extent, as well.
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