Even Wealthy Landlords Are Skipping Payments on Office Buildings
Commercial real estate gave investors a long-term fixed asset to love. But rising interest rates and remote work will bring more defaults to downtowns near you.
Wall Street titans pride themselves on knowing when to take risks, especially in moments of uncertainty. But as borrowing costs soar and the work-from-home trend leaves downtown offices half empty, even the biggest players are quickly realizing they miscalculated.
Take Pacific Investment Management Co. In 2021, even after offices emptied during the pandemic, funds managed by the $1.7 trillion asset manager acquired Columbia Property Trust, which owned at least 15 office buildings in New York, San Francisco, Boston and Washington, DC, for $3.9 billion, including debt. “High-quality office buildings in major US cities offer long-term value for our clients,” Pimco’s global head of private commercial real estate, John Murray, said at the time.