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Viewsroom

Commercial property pain is only just beginning

Viewsroom

Reuters

News

4.458 Ratings

🗓️ 13 April 2023

⏱️ 13 minutes

🧾️ Download transcript

Summary

Valuations of offices and shopping malls are under threat as rising interest rates ratchet up the cost of buying real estate. In this Viewsroom podcast, Breakingviews columnists discuss how inflation and remote working could make the crisis far worse than 2008. Visit the Thomson Reuters Privacy Statement for information on our privacy and data protection practices. You may also visit megaphone.fm/adchoices to opt-out of targeted advertising. Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0

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to learn more. The views expressed on this podcast are those of the participants, not of Rogers News.

0:38.2

So they've had these very sort of low yields. They call them cap rates. It's sort of the industry

0:43.6

term for the yield and the rent of the properties. They have these very low cap rates. And then

0:48.2

all of us on this very high funding issue. And that has caused like an inversion in the market that hasn't happened since

0:55.6

Lehman Brothers, whereby in a lot of these sectors, you're getting lower yield on rent than the

1:00.4

cost of borrowing. And this is a huge problem. Dorm clouds are gathering over the commercial

1:05.5

property sector. Higher interest rates are making the offices and shopping malls less appealing. And

1:10.8

if landlords can't manage to finance the debt or raise rents, defaults will follow.

1:16.5

The looming crisis in the sector is the focus of this week's Views Room.

1:22.7

Welcome back to the Viewsroom, the podcast from Reuters Breaking Views, where columnists from around the world talk about the big stories of the week. I'm your host, Amy Dunlin.

1:34.3

The real estate market of shopping malls and office blocks is straining in a world of

1:39.4

higher interest rates. For prospective buyers of property, higher rent is a must-have to make up for the inflated

1:45.9

cost of borrowing. But when companies are considering culling space as they embrace hybrid working,

1:51.4

that may not be so easy. Here to talk to me about this evolving situation is Lauren Silva-Lockden,

1:57.0

US editor of Breaking Views, who has been delving into this topic.

2:00.9

Thank you. Lockdown, US editor of Breaking Views, who has been delving into this topic.

2:12.0

You are very welcome back, Lauren. Thank you so much for having me.

...

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