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 [out],” 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 [and] 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.”