There's no place like home: Yen carry trade unwind, Google ruling and distressed office investing
The world’s largest carry trade hits the skids: a surge in the Japanese Yen is resulting in home repatriation of Yen-funded positions overseas, and close-out of Yen-funded positions abroad.? Work-from-home trends have plateaued at ~30%, which has important implications for owners of impaired office buildings.? Most distressed office sales now require discounts of 60%+ vs pre-COVID levels; the fundamentals of the office sector explain why.? While Google was found guilty of home bias anti-competitive search engine behavior, any judicial remedies could be as bad for recipients of Google’s shelf space payments as they are for Google itself.?
Michael Cembalest, JP Morgan Asset Management
Really good insight of the WFH implications on office investing. While buyers may get a bargain, buildings sold for less than their debt value create budget constraints, indirectly pressuring conversion costs. The risk that conversion costs exceed the estimated loan is high in my opinion, otherwise, the OPEX and FM costs could be much higher - hidden liabilities. In addition, brownfield conversion of buildings is a niche area with limited supply in the E&C sector. On the bright side, these conversions enhance sustainability. I recommend reading the full article. There’s a lot to unpack!