There is no love in the heart of the city.
Bobby “Blue” Bland may have recorded that hit song about the urban problems of the 1970s, but his message still resonates today as big cities struggle to recover from the pandemic.
On the other hand, the city’s large office buildings have begun to change hands after sales fell to an eight-year low of $ 61.6 billion in 2020, according to a new CommercialEdge report.
The problem has been that the buildings have been getting lower prices. Average sales prices fell to $ 284 per square meter in office buildings in the central business districts this year, below a high of $ 400 per square meter in 2019 and $ 379 per square meter l last year, according to the report.
Sales figures are based on $ 36.9 billion worth of office transactions that occurred this year through July, for CommercialEdge, which tracked sales of 50,000-square-foot office buildings or month.
The report also noted pressure from the delta variant of the coronavirus, increased hospitalizations, and lower-than-expected vaccination rates among the U.S. population, prompting many companies to delay their plans. return staff to their offices in September.
Wells Fargo & Co. WFC,
Google parent Alphabet Inc. GOOG,
Humana Inc. HUM,
and BlackRock Inc. BLK,
have pushed back their return dates to October, the report noted, noting that a host of other major companies, including AMZN,
Amazon.com, Lift LIFT,
and Dell DELL,
they have further delayed their returns.
Uncertainty surrounding the office sector is occurring, as many white-collar workers have been working remotely for nearly 18 months during the pandemic. During this time, the vacancy rate for domestic offices has also risen to 15.5% in July, but may have reached a “plateau” after rising 190 basis points a year ago.
Read: Can empty offices be converted into affordable housing? New legislation wants to prove it
While there have been bright spots, with low 10-year Treasury yields TMUBMUSD10Y,
making it unattractive for homeowners to buy office buildings or refinance existing debt.
Shares of SL Green Realty Corp SLG,
one of New York City’s largest office owners, up 16.7% year-over-year until Monday, or surpassing the Dow Jones Industrial Average DJIA,
they are up 15.6% this year, according to FactSet data.
In addition, when looking at urban supermarkets on the outskirts of central business districts, office property prices have risen to $ 511 per square meter this year, from $ 399 per square meter in 2019, according to CommercialEdge.