Downtown? I know a place where the crime and congestion isn’t so bad, the suburbs.

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. 

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.

Between 2019 and 2023, about $557 billion of value evaporated from US offices due to a multi-year slide in demand, with older towers quickly falling out of favor with companies, according to an estimate by economists at Columbia and New York universities. CBRE Group noted that only 2% of towers in the US are considered top-tier, with rents 84% higher than the rest of the market. 

Data from brokerage Savills shows office rents in business districts have grown slower than rents for similar buildings outside metro areas. 

The move to new towers highlights how, for decades, the bubbles in legacy downtown districts, fueling economies, have ended for now, and older towers will have to be torn down.

To be very frank. It’s a crisis. Democrats running the crime-ridden metro area are delusional and blinded by their woke religion as the city’s population recently crashed to a 100-year low, and violent crime remains a major issue.

We’ve had conversations with multiple folks at wealth management and investment banking firm Stifel Financial about the latest shift of operations outside the dying business district to a new tower in a much safer and newer district. At first, Stifel contemplated leaving the city for the suburbs because far-left Democrats in City Hall could not enforce law and order.

CRE foreclosures are on the rise.

Don’t forget about Soros-funded district attorneys not enforcing the law in large cities. Expect more of the same if Harris/Walz win the election.