Remote Work And Rising Interest Rates Are Changing The Landscape Of Commercial Real Estate

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?? In a progressive move towards redefining the traditional work week, Scotland’s government is gearing up to launch a four-day work week plan for some of its civil servants. Read Full Digest??

?? In the post-pandemic economy, perhaps the biggest challenge is the return to office (RTO) debate. While many aspects of life are reverting to pre-pandemic norms, the workforce remains in flux over how and where professional work gets done.?Read Full Digest??

?? Listen to our latest Future of Work Podcast episode with Drew Jones , founding partner at Experient and founder and principal consultant at Drew Jones Design.

Remote Work And Rising Interest Rates Are Changing The Landscape Of Commercial Real Estate

Exploring the intersection of banking turmoil, interest rates, and commercial real estate loans in the future of work. By #FutureOfWorkVoice Joshua Michael Jahani

• As interest rates increase, it becomes more difficult for investors and lenders to generate profits from debt-based investments, and commercial real estate falls into this classification.?
• Data shows that recessions have minimal influence on the long-term value of real estate investments, similar to how one may consider the performance of index funds over periods that eclipse recession time frames.?
• As companies create strategies to integrate remote and in-office working styles harmoniously, we’ll see a decrease in 9-to-5 shifts and an increase in corporate outings, corporate events, and corporate activities in key urban centers that include a significant amount of commercial real estate activity.?

Commercial real estate in America is financed through various channels, including commercial banks and private lenders. However, the ongoing increase in interest rates by the federal reserve poses challenges for these entities to generate a return on investment (ROI) through loan issuance. Consequently, they are exhibiting reluctance in engaging in lending activities, and this is having an impact on people’s ability to finance and grow commercial real estate. This directly impacts the future of work as organizations reimagine their office environments.

The state of investments in the real estate market?

Compared to residential mortgages, commercial real estate is perceived as semi-risky. Investors with long-term goals seek commercial real estate opportunities as it has a steady cash flow due to the long lease terms in place for tenants. Conversely, commercial real estate has been bearing the brunt of the work from home explosion, leading it to a double factor of difficulty when it comes to generating profits for its investors: less use and less finance-ability. According to The Economist, in Spring of 2022, commercial real estate investments in Western Europe and the United States fell to all-time lows since before the start of the pandemic.?

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