Those of us that make a living designing or constructing buildings may be interested in a recent ENR article about US skyscrapers selling at incredibly cheap prices. A 40 story tower in NYC (1330 Avenue of the Americas) just sold to a Canadian pension fund for $100,000. Three years ago that building sold for $500M. The owner defaulted on his $130M bank loan for a building located near the Museum of Modern Art, Rockefeller Center and Central Park. The Canadian pension fund held that $130M loan and agreed to take over the rest of the mortgage payments in hopes of avoiding a total loss.
While this example amazes, plenty of tall buildings around the country are selling at incredible prices. Tenants leave, developers can’t find new tenants or loans to cover the shortfall and the properties go into default. With the lack of financing options, one source compared it to a scenario if all houses had to be paid for in cash, with no financing available. The prices of houses would plummet, because so few buyers would be able to purchase. The supply of houses would be huge and the demand would be tiny, thus the prices would free fall.
Many industry sources think the next 12 months will see this scenario play out in the commercial real estate market. If it does (if the government or the market are unable to help create a sense of confidence for the banks to loan again), then we may be in for a rough ride for a spell.
We may be wise to pay heed to what Winston Churchill said about World War II in 1942, “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”
To end on a more upbeat tone, though, I’d like to share this article in the NY Times Magazine that may encourage you in the career choice you made.