By Joe Delogu, Founding Principal at FD Stonewater
Recently, I had the privilege of joining Frank Smith, Deputy Executive Director for the Georgia State Properties Commission and Bruce Nelson, Executive Director of Real Estate Strategy, State of Tennessee Real Estate Asset Management on a webinar panel for the National Association of State Facilities Administrators (NASFA) titled The Looming Crisis in Commercial Real Estate (a description is available HERE).
The webinar was moderated by FD Stonewater partner Norman Dong, and during the panel we examined the considerable challenges facing the commercial office market, including increased vacancy rates, skyrocketing construction costs, rising interest rates, and declining asset values. We explored how recent dynamics have led to a “perfect storm” in the office market that is negatively impacting macroeconomic lending activity through significant credit tightening, decreasing loan origination volume, and challenging economic conditions for owners and investors alike.
Additionally, Frank, Bruce, and I presented detailed case studies from recent projects that have been adversely impacted by these difficult market conditions, and we discussed challenges and potential opportunities for Government real estate officials during these difficult times.
Following a thought-provoking discussion, the webinar concluded with our shared concerns about the current economic environment making it more difficult for landlords to meet their lease obligations and finance tenant improvements, while at the same time presenting significant obstacles for the local property management teams and special servicers who often lack the experience and market expertise required to resurrect a failed project.
That said, we do see a silver lining in the rare increased availability in many markets that could provide valuable opportunities for Government real estate officials to renegotiate existing leases or upgrade to higher quality buildings and preferred locations through new leases or acquisitions.
Click here to view the webinar in its entirety.