Commercial real-estate investors and lenders are slowly confronting an ugly question: If people never again shop in malls or work in offices the way they did before the COVID pandemic, how safe are the fortunes they piled into bricks and mortar?
Office buildings are seen in downtown San Francisco as the city struggles to return to its pre-pandemic downtown occupancy rate, falling behind many other major cities around the country, according to local media, in California, U.S., June 29, 2023. REUTERS/Carlos Barria/File Photo
Cyclical downturns rarely prompt fire sales, so long as lenders are confident the investor can repay their loan and the value of the asset remains above the debt lent against it. That means values of city-centre skyscrapers and sprawling malls may take much longer to rebound. And if tenants can't be found, landlords and lenders risk losses more painful than in previous cycles.
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