A Boston-based Real Estate Investment Trust has projected a national recession for commercial real estate, according to a February article in Boston Bisnow. The CEO of BPX, Owen Thomas, declared that commercial real estate is “currently in a recession” during an earnings call to investors.
BPX owns and manages about 54 million square feet of commercial real estate, including office space, in several large metropolitan areas of the U.S. During the earnings call, Thomas noted that announced layoffs at some of the largest employers of the U.S. is affecting office occupancy and softening future demand. In fact, net office demand may turn negative in some metros.
The tech sector is bearing the brunt of recent layoffs, with high-profile companies like Amazon, Microsoft, Meta, Twitter, Salesforce, WeWork and Google trimming headcounts. Cities such as San Francisco, New York and Washington D.C. have already felt the impacts of these layoffs. While Greater Boston will not be immune from the domino effects of layoffs, or from a looming recession, our diverse economy may mute the impacts.
A bright spot noted by BPX’s CEO is the increased leverage employers have in a changing job market. Return-to-office activity has strengthened in certain areas, reducing vacancies in some office buildings.
As employers adjust to changing economic conditions, layoffs could impact multiple industries. This will cause headwinds for Boston Metro commercial real estate, but our market has proven resilient during other financial disruptions. Building owners and managers should be prepared to discuss a tenant’s changing business needs, and consider flexible, scalable solutions to minimize vacancies.
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