Real Estate

As values slide, Brookfield Asset Management plans to boost commercial real estate investment

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Pedestrians and office workers walk past the Bay St. entrance to Brookfield Place in Toronto’s Financial District, on July 12, 2022.Fred Lum/the Globe and Mail

Not since the Great Recession, Brookfield Asset Management Ltd. BAM-T says, have there been such attractive real estate investment opportunities.

Persistently high interest rates coupled with the rise of remote working means “the best real estate opportunities since 2009 are coming,” the Toronto-based investment company said Wednesday in a letter to shareholders published alongside its second-quarter results.

The company, which owns a one-quarter stake in the asset-management business that is 75 per cent owned by Brookfield Corp., is hoping to capitalize on plunging commercial real estate valuations. Other institutional investors are remaining on the sidelines and Wall Street banks are writing down billions of dollars in commercial real estate assets.

“Given the increase in interest rates, people were ill-prepared

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Real Estate

The office real estate crash will be so sharp and deep that Capital Economics thinks office values are unlikely to recover by 2040

In its original forecast on the impact of the pandemic on the office sector, Capital Economics said that office occupancy would fall by 7% to 8% by 2025, with that, “vacancy would rise markedly and remain elevated” through 2030. And those lower occupancy levels and declining rents would result in a 20% decline in portfolio incomes by 2025, all the while net operating incomes would remain below pre-pandemic levels through the decade. 

Now, the research firm suggests that the “35% plunge in office values we’re forecasting by end-2025 is unlikely to be recovered even by 2040,” in a new report published on Thursday. That means that offices are unlikely to regain their peak values in the foreseeable future, or in the next 17 years, per Capital Economics. That’s because of dramatically lower demand following the shift to remote work that emerged from the pandemic. 

The report, written by Capital Economics’

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