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Commercial real estate a bigger risk than previously thought: OSFI

Top banking regulator flags co-lending arrangements and lagging ratings changes among heightened risks

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Canada’s top banking regulator is flagging commercial real estate lending as a bigger risk than previously thought as higher interest rates persist and a practice known as co-lending increases.

The Office of the Superintendent of Financial Institutions warned in an Oct. 12 update to its list of the highest risks facing the sector that valuations in a fast-changing landscape could quickly become outdated and that trends including co-lending could increase default risks and recovery values.

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Real Estate

Opinion: A crisis in commercial real estate, a crisis in housing: two problems, one solution

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Empty office space at 520 Eighth Ave. in Manhattan on Aug. 22.HARUKA SAKAGUCHI/The New York Times News Service

David Clement is the North American affairs manager with the Consumer Choice Center.

While for many Canadians the pandemic is behind us, one of its enduring effects is the lack of demand for commercial office space. During the pandemic, many people reasonably thought that as life returned to normal, so would the need to be back in the office full-time. This never panned out, and the office vacancy rate in almost every major Canadian city is a perfect indicator of that. In the second quarter of this year, arguably the most the pandemic has ever been behind us, the office vacancy rate in Canada actually increased to 18.1 per cent.

This new reality is horrific for the firms that own office towers. It means they’re left

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Real Estate

Commercial real estate crisis: Downtowns are dead, dying or on life support, says urban policy expert

The hollowing out of U.S. cities’ office and commercial cores is a national trend with serious consequences for millions of Americans. As more people have stayed home following the COVID-19 pandemic, foot traffic has fallen. Major retail chains are closing stores, and even prestigious properties are having a hard time retaining tenants.

The shuttering of a Whole Foods market after only a year in downtown San Francisco in May 2023 received widespread coverage. Even more telling was the high-end department store Nordstrom’s decision to close its flagship store there in August after a 35-year run.

In New York City, office vacancy rates have risen by over 70% since 2019. Chicago’s Magnificent Mile, a stretch of high-end shops and restaurants, had a 26% vacancy rate in spring 2023.

A recent study from the University of Toronto found that across North America, downtowns are recovering from the pandemic more slowly than

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Real Estate

The Growing Commercial Real Estate Threat Facing Our Economy

I attended a fascinating real estate investors’ conference for hedge funds, lenders and owners. The talk of the conference was the almost complete inability of landlords (other than owners of tier 1 properties), to get any financing at all, except at exorbitant rates around 15% which is more than double the current financing that these buildings have in place.

This underscores what may be the greatest threat to the otherwise resilient American economy. We know that major banks and technology firms have recently been mandating return to office for three days or more. We’re waiting for post-Labor Day figures for some meaningful employee attendance numbers, but the national and New York attendance rates remain mired slightly below 50% for the summer. If current trends continue defaults will increase, and the treacherous triangle of

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Real Estate

Commercial real estate apocalypse threatens economy and midsize cities

In Indianapolis, the technology giant Salesforce is paring back a quarter of its office space in the tallest building in Indiana, where it has been a key tenant for the past six years. In Atlanta, the private investment giant Starwood Capital defaulted on a $212 million mortgage on a 29-story office tower. And in Baltimore, a landmark building sold for $24 million last month, roughly $42 million less than it fetched in 2015.

All across the country, downtowns, office spaces and shopping centers are at risk of becoming ground zero for a new economic hazard: the urban doom loop. The fear is that a commercial real estate apocalypse could spiral out and slow commerce, wrecking local tax revenue in the process. Ever since the pandemic drove a boom in remote work, hubs such as New York and San Francisco have drawn attention for their empty

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