With 23% of US Office Space Vacant, Some Landlords Are Defaulting on Mortgages

The New York Times reports:

Office landlords, hit hard by the work-from-home revolution, are resorting to a desperate measure in the real estate world: 'handing back the keys.' When this happens, the landlord stops paying the mortgage on the office building or declines to refinance it. The bank or investors who made the loan then repossess the building...

Since the pandemic began, office employees showed they could get their jobs done from home, and many have been reluctant to come back. And companies realized they could save a lot of money by renting less office space, making many office towers unprofitable for their owners and turning many business districts into ghost towns. About 23% of office space in the United States was vacant or available for sublet at the end of November, according to Avison Young, a real estate services firm, compared with 16% before the pandemic.
Defaulters include 'some of the biggest names in commercial real estate, like Brookfield and Blackstone,' according to the article, which argues that the phenomenon 'reveals both the depth of the problems in the office market and the ability of big property companies to push much of the financial pain onto others — in this case, banks and other lenders.'

By defaulting on their loans, the landlords avoid making any more payments (or incurring any more interest) — while saddling the banks with their depreciating building. 'Big property companies can keep doing business after they default and are even considered savvy for jettisoning distressed buildings.'

Read more of this story at Slashdot.