As long-term leases expire, more tenants are giving notice of non-renewal, because they're not using all the space they have. Many office buildings are facing declining revenues in the near term. Most cannot fulfill their monthly debt service obligations if tenant collections drop below ~80% leased, give or take.
Many regional banks, in particular, are loaded up with loans to office buildings.
Supply and demand works the opposite way.
We haven’t even touched on all the Boomers retiring and zombie companies that’ll be flushed out of the economy by the Fed holding the benchmark rate up.
A lot of atoms in the economy are on their way to finding substitutes, and it's disruptive to our understanding of where economic wealth is - valuation of land, raw materials, intellectual property. Those are things I don't want to hold during a restructuring because I won't have a clear view of where they ultimately land. My portfolio focus has gone towards embracing new/emerging asset classes, as those are proven survivors when the economy undergoes structural change. Just a matter of spreading risk so that the ones that go to zero are cancelled out by the 10x'ers.
Crypto is a big one in that portfolio - for as much as I complain about how misguided it can be, there's a there there, and the political tension around it reflects the fact that its adoption would be part of a major structural shift. The current wave of generative AI is also that, and EVs, self-driving, and other disruptive tech. All the stuff that gets people really hot and bothered.
What uses would those be?
I just read an article saying that the costs would be prohibative to upgrade office highrises into apartments.
Here is one that I just googled:
https://www.bizjournals.com/bizjournals/news/2022/04/13/offi...
I read another article about it being the same thing in Los Angeles - cost prohibative.