well office building are not a place you can live .....its empty rooms ........ they offer nothing........ except......... well office....of course they have no worth......... like a house/flat/condo/townhouse....etc ....etc ......i always knew that .........who did not ....... probably some putz ........it's rooms ........ they have no bathrooms........ living rooms....... etc...etc ......geez Louise.......... are these people delusional or what .....
Office owners refuse to accept that their buildings are worth less. It means a commercial-real-estate recovery may be slower.
- Commercial property investment volume plummeted in the first quarter.
- Owners haven't come around to accepting the drops in property prices, Bank of America analysts wrote.
- The stagnant market will only slow the eventual recovery.
The best way to determine how much an office or apartment building is worth: its selling price. The problem is, there aren't that many sales.
Investment volume in commercial real estate fell off a cliff last quarter. According to CBRE, transactions plunged 57% in the quarter versus a year earlier to $78 billion — the lowest in at least a decade if pandemic quarters are excluded — with dealmaking led by apartment and industrial buildings that remain in investors' good graces for their more stable incomes.
It's no surprise why buyers should be reticent. Soaring interest rates are jacking up financing costs, and tighter underwriting standards are forcing them to bring more equity to the closing table. On the fundamentals, multifamily landlords can't push big rent increases as they did during the pandemic. Office owners are grappling with tenants not renewing their leases, or negotiating less space.
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Homebuyers, take note: 21 spots across the US where prices may fall
- Places where homes are expensive and unemployment is high are at risk for housing-market declines.
- Real-estate data firm Attom evaluated which counties across the country are most vulnerable.
- Parts of Chicago, New York, and northern California are most at risk of declines. See the full list.
As the economy teeters on the brink of a recession, the country's housing markets could be in for a downturn.
A new report from Attom Data Solutions, a real-estate data provider, offers a perspective on which areas could be most vulnerable to declines — whether it's in home prices, sales activity, or other indicators of overall health.
Existing homeowners may whinge at the thought of property values decreasing, but this data could be useful for homebuyers on a tight budget and real-estate investors who are keeping a close eye on markets that could experience further softening. While it's impossible to time the market — and it's risky to assume that prices in any one place will continue to increase — being aware of which areas are currently vulnerable may benefit anyone looking for a deal on a home.
Attom's researchers looked at a number of key indicators to determine the overall health of a region's real-estate market. The number of homes where owners owe more than they're worth, for example, indicates the prevalence of homeowners who "underwater" on their mortgage and may eventually need to sell. Such a sell-off would provide opportunistic buyers with good deals.
The report authors also looked at the number of properties currently under foreclosure, which means that lenders are currently in the process of repossessing the homes. They also looked to see if the median sale prices of a county was out of step with the percentage of the area's average income needed to pay for a home. Home prices that are out of reach for many locals suggests they are overly elevated. Last, the local unemployment rate is a sign of weak short-term economic prospects, and could mean that those out of a job, with no steady income, may need to list their home for sale.
There are a few key takeaways from the report. One is that the counties around major cities such as Chicago and New York are particularly vulnerable. The data also helps illustrate just how unaffordable homes are are in California and New York, where there are more people who are cost-burdened — or those who spend 30% or more of their take-home pay on housing. (A general rule of thumb is to spend 28% or less of your monthly income on housing costs, according to personal-finance experts.)
Out of the 581 counties Attom analyzed, here's a look at the 21 counties that are most vulnerable to a decline. They're listed in order from least to most vulnerable.
But with few transactions on which to peg market values, is the market truly down? To many owners, the answer seems to be no, according to analysts at BofA Global Research, who warned their readers that property values would be under pressure until they "more fully" account for market conditions.
Related video: Sirius Real Estate CEO says demand for office space is increasing on the edge of towns (CNBC)
CNBC
"To date, however, it seems that many investors are loathe to accept current pricing levels and as a result, transaction volume decreased sharply over the past month," the analysts wrote in a report on Friday.
The refusal to accept the declines is only slowing the eventual recovery, according to some industry players.
Last week, Alfred Brooks, the head of JPMorgan's commercial real estate group, said he's seen distressed buyers already raising money to pick up the pieces, once prices get low enough.
Richard Rubin, a developer who wants to breathe new life into office properties, is searching for bargains but told Insider's Alex Nicoll that current owners are far from being realistic about their pricing.
"If you're a large institutional landlord, there's a mountain of pressure to continue the myth at the moment, that commercial offices are going to bounce back," Rubin told Insider earlier this year. "You have a number of folks that don't want to fess up to the fact that the commercial office — as we effectively knew it before — is dead."
Indeed, commercial real estate values are down, by other measures.
According to the RCA Commercial Property Price Index, property values overall fell 8% in the first quarter, year-over-year, led by apartment buildings with a drop of 10.3%. The declines became more widespread in April, meanwhile, with even industrial properties that have been darlings of big investors like Blackstone falling, MSCI reported on May 26.
April was the first month since 2010 that prices of all types of commercial property fell on an annual basis, according to MSCI.
To be sure, some owners are accepting of today's lower values. But sales are led by those on multifamily properties, which are still favored by investors and owners can book profits because their values have soared more than other kind of commercial property over the last decade, according to BofA Global, citing the
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