Once upon a time, central business districts and downtown areas were considered “a mother load for American cities over the years” according to a recent Wall Street Journal article. These submarkets generated billions in tax revenue, providing city bondholders with decent returns. However, the WSJ now points out that investor sentiment towards America’s downtown submarkets has cooled considerably; REITs focused on CBD property are trading at less than half their pre-pandemic levels while bondholders demand extra interest for office-building debt.
The continued work-from-home trends have led to subsidiaries of Pacific Investment Management and Brookfield Asset Management defaulting on more than $2 billion In CMBS on office towers in New York Los Angeles and San Francisco as well as public transportation ridership being at less than 70% of pre COVID levels in major metros. Despite this however analysts from Asset Preservation Advisors remain confident about certain tax backed bonds sold by New York City and Boston but wary about debt issued by other Northern urban centers or larger California cities due to people not returning back into offices like before the pandemic began – leading suburbs becoming one of “the big winners”.
Asset Preservation Advisors have stopped buying fare backed debt from The New York Metropolitan Transportation Authority unless it matures soon while investors find opportunities in suburban bonds issued from lower tax Southern & Western states which are attracting companies & workers away from northern big city centres .
