Everyone knows about rising unemployment and falling customer spending. But what may not be apparent immediately is how this will affect office and retail properties. Many experts predict that the next industry to take a heavy blow in this economy will be commercial real estate. According to them, losses on commercial real estate will mean another hit to real estate investment trusts and the banking system. The contracting economy will leave offices empty and lead to defaults on the borrowing used to finance buildings. However, according to Boston Properties, one of the largest commercial real estate holders, market conditions are not suffering anywhere near that much. Earlier this month, they reported favorable earnings and a rise in values of their shares. However, the company chairman recently claimed in an editorial for the Wall Street Journal that the economy was hurting even worse than this. Boston Properties’ success, he says, is because of its focus on Class A office buildings, which operate in a different economy than lower-grade units. Because it’s a quality company with large assets and good balance sheets, Boston Properties will survive bad economic times and be able to keep making valuable acquisitions.
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