As More People Work From Home, Will Commercial Real Estate Crash? Professor Norm Miller Weighs In

Downtown San Diego

The coronavirus pandemic has changed consumer and market behavior in unprecedented ways, affecting nearly every industry including commercial real estate. In the San Diego Union-Tribune, Hahn Chair of Real Estate Finance Norm Miller is quoted saying that the commercial real estate market "could get worse before it gets better." Professor Miller, along with other experts, elaborates on factors that will affect commercial real estate in the long-term. 

Excerpt as it appears in the San Diego Union-Tribune:

Coronavirus fallout: Is commercial real estate headed for a crash?

About 12 percent of professionals worked from home before the pandemic, said Norm Miller, the Hahn chair of Real Estate Finance at the University of San Diego School of Business. That could easily rise to 18 percent to 20 percent going forward.

“That is not that much of an increase,” he said.

Miller estimates that rent collections are down 12 percent in the office sector from tenants no longer paying their leases, based on survey data from Pension Real Estate Association and other sources.

It could get worse before it gets better, he said.

Landlords have been willing to consider rent deferrals and other steps to keep tenants, according to brokers and tenants.

But landlords want to see business financials and audit business plans for survival before agreeing to a rent deferral or rebate. They also want to know if tenants received Paycheck Protection Program loans or any other stimulus funds — some of which can go toward rent.

Renegotiating existing lease terms is more difficult. Lenders typically must sign off before a landlord can offer significant lease modifications.

“Banks and insurance companies are generally willing to be reasonable about reviewing renegotiated leases, and to even modify loan terms in some cases,” said Miller. “But the commercial mortgage-backed securities money, that is thousands of investors that bought this pool of mortgages, and it is pretty much impossible to modify...



Renata Ramirez
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