Older Office Towers In Cities Face “Tsunami Of Trouble”

Commercial real estate market challenges are more severe for older office towers in downtown metro areas than those outside city centers. The mismatch between funding needs and available credit in a high-interest-rate environment has also intensified the strain on building owners, as elevated tower vacancy rates persist across many markets due to the ongoing trend of remote work becoming the norm.

Bloomberg penned a CRE note on aging business districts from Los Angeles to Chicago to Boston of zombie towers with high vacancy rates that have no use in today’s economy.

Big landlords, including Brookfield, Blackstone, and Starwood Capital Group, have walked away from older downtown towers in recent quarters.

The latest data from MSCI shows office values in metro areas have crashed 52% from their highs. Some of the worst declines have occurred in San Francisco, Manhattan, Washington, and Boston.