In a healthy office market, vacancies are around 8% to 12%, said Michael J. Riccio, senior managing director and co-head of national production for CBRE’s debt and financing arm. At the end of the first quarter, Greater Hartford’s office space availability rate reached an all-time high of 29.9%, according to CBRE data. Riccio said many […]
In a healthy office market, vacancies are around 8% to 12%, said Michael J. Riccio, senior managing director and co-head of national production for CBRE’s debt and financing arm.
At the end of the first quarter, Greater Hartford’s office space availability rate reached an all-time high of 29.9%, according to CBRE data.
Riccio said many traditional banks will be eager to unload office assets, even if they are still performing. And landlords who need to refinance in the near term need to put up equity to cover at least some of their property’s lost value.
Check out related story: Wave of commercial loan maturities puts office landlords and lenders on edge
That is giving rise to a cottage industry of investors who are raising funds to service that market. It’s riskier, but the yields will be much higher, he said.
“Most of the lenders who will do that have the ability to own that property if they need to,” Riccio said. “Private equity funds have raised a lot of money for this because they see that issue, and they see the opportunity coming.”
Riccio said it’s possible many office buildings will become mothballed, and then it will fall to local and state governments to deal with the problem.
“There will be office buildings torn down,” he said.
He also cautioned that doom isn’t hanging over all office properties.
Modern buildings offering highly sought amenities, and in premium locations, will continue to function well, he said.
Check out related story: Wave of commercial loan maturities puts office landlords and lenders on edge
