Beware of the office zombies
A year ago, we talked about “stranded assets” i.e. those at the mercy of shifting working patterns, but particularly changing environmental standards. We now have new terminology: “zombie” assets, a term that as Peter Bill points out in his recent Property Week column, Americans have coined to described those offices that are: “half-empty, financially dead blocks, unviable to upgrade”. According to Bill, these now comprise 40% of New York office stock. Unsurprisingly, the anticipated impact on valuations is stark.
Yet, as we described a year ago, surely any hint of distress gives rise to potential opportunity, at least for those that can fund the capex to bring a building up-to green standards, whether regulatory, or dictated by investors and incoming occupiers.
And of course, as the sector plots a way towards net zero, we simply cannot ignore existing stock. Quoting a panellist at a recent BPF webinar: “you have to go through various shades of brown to get to various shades of green”. This stock is precisely where “green” investment needs to find a home. Not everything can be bright new shiny energy efficient etc new builds.
Subcribe to news and viewsThere are thousands of zombie blocks with no obvious future. Obsolete space that will likely act as a drag anchor on grade-A space for years to come.
https://www.propertyweek.com/insight/zombie-offices-are-a-scary-prospect/5123173.article
