Already faced with public safety concerns and ongoing work-from-home challenges, commercial real estate projects downtown and across the city are slowing due to interest rate hikes, high construction costs, and increased bank caution. As a result, some see less housing construction and rising financial problems for office buildings.
“It’s a tougher lending environment to get construction loans right now. . . . Lenders are just being super selective. . . . A lot of deals just aren’t penciling ,” said senior loan officer Robert Meunier of Bellevue Capital Group.
These challenges are compounded by declining residential rents—down 1% from a year ago. Similar problems are crippling office buildings, as leasing volume is down 39% from last year. Available office space has climbed from 19% in 2022 to 23% in 2023.
“Places like Seattle, San Francisco, Washington New York, have all struggled with the remote work, hybrid work environment,” according to Stephen Buschbom, research director at Trepp, and banking industry turmoil is a “stress multiplier.”
