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Commercial Landlords: Deeper Problems Than in Previous Economic Downturns

Commercial real estate has experienced its share of busts in recent decades, the Wall Street Journal reported Monday, noting that this downturn is different. Landlords are contending with a cyclical market downturn as well as secular changes in how people work, live and shop. A sudden surge in interest rates caused property values to fall while remote work and e-commerce have reduced demand for office and retail space.

Investors and economists say these two forces haven’t converged on this scale since the 1970s when a recession followed surging oil prices combined with a stock-market rout along with new technologies enabling jobs to move out of major cities. This time around, the pandemic is largely responsible for accelerating commercial property upheaval according to WSJ .

It remains uncertain how bad the commercial property downturn will get; some analysts suggest it may be less severe than previous recessions such as those experienced early 1990s or after 2008 financial crisis – particularly if U.S economy avoids deep recession coupled by quick reduction of interest rates . However deeper problems facing office spaces & certain retail landlords mean building values are unlikely to rebound like they did after past meltdowns .

This could spell trouble not only for economic growth but also banks , pension funds & asset managers who lend on/own commercial properties ; “You literally have trillions of dollars of investment that are suddenly just massively impaired,” Dan Zwirn , CEO at Arena Investors (a New York based asset manager & real estate investor) told WSJ

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