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 and secular changes such as remote work and e-commerce reducing 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 and stock-market rout while new technologies enabled jobs to move out of major cities. This time, the pandemic is largely responsible for accelerating commercial property upheaval according to WSJ reports.
It remains unknown how bad the commercial property downturn will get; some analysts suggest it may be less severe than previous recessions in early 1990’s or after 2008 financial crisis if U.S economy avoids deep recession & interest rates start coming down quickly; however building values are unlikely to rebound back to new highs due to deeper problems facing office & certain retail landlords . This could have serious implications on economic growth as well as banks, pension funds & asset managers who lend/own properties – “You literally have trillions of dollars of investment that are suddenly just massively impaired” said Dan Zwirn CEO Arena Investors New York based asset manager & real estate investor told WSJ .
