Is the real estate market going to crash? In a previous episode, I explained why I predict the housing market will not crash anytime soon.. but today I’m going to share about the REAL impeding market crash: commercial real estate.
On this episode of Investing in Real Estate, you’re going to learn what’s happening in the commercial office space.
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The pandemic brought about sweeping changes in our society, with one of the biggest transformations happening in the workplace. The work-from-home revolution has changed the landscape for workers, businesses, and commercial real estate investors alike.
Data shows that working from home is here to stay. During the pandemic, workers rebuilt their workday around home offices, Zoom calls, and building new skill sets. Many people find they like the flexibility and work/life balance that working from home can provide, plus the perks of reduced travel time and expenses. Employees have proven that they can work efficiently from home, so what’s the point of a brick-and-mortar office anymore?
While some companies have required employees to come back to the office in some capacity, this report shows that hybrid work is here to stay. Office attendance in major cities has plummeted by 30%.
Is work from home culture good for the economy? The jury is still out on that one. But there’s certainly one sector that comes out as the real loser from this change… Due to lower office attendance, higher out-migration from big cities, and less frequent shopping, the demand for commercial real estate is expected to dip by $800 billion in office space value by 2030.
The shopping landscape, too, has changed drastically over the past few years. Retail vacancies have increased, and rents have declined.
I encourage you to take a look at the McKinsey Report, Empty spaces and hybrid places, to get a full overlook at how the pandemic has impacted the commercial real estate market.
There is no slow down happening on the residential side… In fact, there’s a higher demand than ever for affordable housing. But for the commercial and office space, there is a ton of volatility. A lot of banks are holding debt on commercial office spaces, and more and more commercial landlords are defaulting on their loans. Even some of the biggest names in the commercial real estate game, like Blackstone, have defaulted on commercial mortgages and have handed back the keys of their once profitable office buildings.
The future is bleak in the commercial real estate space. That’s the last place I’d suggest investing in 2024. For more on this topic, be sure to check out this next video, Is a US Housing Crash Coming in 2024?
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