Analysis: WeWork's troubles darken outlook for embattled office market

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The troubles faced by co-working titan WeWork (WE.N) are darkening the outlook for the world's largest business hubs, where rising office vacancies are already heaping pressure on investors set to refinance big-ticket mortgages next year.

are darkening the outlook for the world's largest business hubs, where rising office vacancies are already heaping pressure on investors set to refinance big-ticket mortgages next year.

"The loss of any tenant, especially during a time of relatively slow office leasing, will have a negative impact on office building cashflows and values," said Moody's Analytics' Commercial Real Estate Industry Practice Lead, Jeffrey Havsy. Analysts estimate the global commercial property lending market is around $2 trillion in size, roughly split 50:50 between banks and alternative lenders in the United States and 85:15 in Europe.

What's more, the gap between what investors believe assets are worth and what prospective buyers are willing to pay is between 20% and 35% in core office markets - "far worse than the height of the global financial crisis", MSCI said. Industry sources said some of its most popular locations could be taken over by rivals at similar rental rates, minimising cashflow issues for landlords.

 

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