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Expect a ton of restructuring deals. Banks don’t want to repossess these properties, especially in the middle of this economy. At this level banks are partners,

by dexwiz 3y ago

Expect a ton of restructuring deals. Banks don’t want to repossess these properties, especially in the middle of this economy. At this level banks are partners, not just lenders. They have a vested interest in keeping these buildings useful. A multimillion dollar building is not a user car or even a suburban home. But commercial mortgages usually have stipulations like a minimum rental price. Everyone boogie man’s zoning, but these mortgages also limit freedom. Many empty buildings couldn’t rent at a lower price even if they wanted to. The banks don’t want managers undercutting each other, and wrecking market value. But they will have to relent eventually. Expect less new builds in the future, but more renovations. Building managers face a tough market right now, and will need to invest in existing stock to compete.

Kon-Peki 3y ago
> Expect less new builds in the future Builders want to build, and lenders want to lend. I recently discovered that in my old neighborhood in Chicago, 4 high rise residential towers have started construction in a 3-block radius in the last 6 months. And over on the other side of downtown, developers have secured financing to begin construction of an 800+ foot tall apartment building on the site of the $300 million hole in the ground (an Irish developer had planned to built a 2000 foot tall building, but went bankrupt while building the foundation). I saw a report by the city of Chicago last month that broke out office vacancy by age of the building, and in new towers the vacancy rate is single digits. Now, you and I both know that the likely explanation is that the tenants of these buildings were solid companies that signed long-term leases as the construction was finishing up. Once those first leases end, all bets are off. But, “It Is Difficult to Get a Man to Understand Something When His Salary Depends Upon His Not Understanding It”. Builders are going to point at that stat and say that new office towers are a good investment. Lenders are going to point at that stat and say that new office towers are safe to finance. Count on it.

by dexwiz 3y ago

Kon-Peki 3y ago

> Expect less new builds in the future Builders want to build, and lenders want to lend. I recently discovered that in my old neighborhood in Chicago, 4 high rise residential towers have started construction in a 3-block radius in the last 6 months. And over on the other side of downtown, developers have secured financing to begin construction of an 800+ foot tall apartment building on the site of the $300 million hole in the ground (an Irish developer had planned to built a 2000 foot tall building, but went bankrupt while building the foundation). I saw a report by the city of Chicago last month that broke out office vacancy by age of the building, and in new towers the vacancy rate is single digits. Now, you and I both know that the likely explanation is that the tenants of these buildings were solid companies that signed long-term leases as the construction was finishing up. Once those first leases end, all bets are off. But, “It Is Difficult to Get a Man to Understand Something When His Salary Depends Upon His Not Understanding It”. Builders are going to point at that stat and say that new office towers are a good investment. Lenders are going to point at that stat and say that new office towers are safe to finance. Count on it.