Office landlords risk closure as they combat challenging market conditions

More than one in seven office landlords say their office buildings are at risk of closing in the next five years due to affordability concerns, new independent research from infinitSpace has revealed.

This comes as a quarter (25%) say their office buildings do not currently generate a profit and a third (31%) of office landlords report struggling with rising debt repayments.

Moreover, 20% lack confidence that they will be able to afford to pay off the debt secured on their commercial properties.

Meanwhile, nearly half (48%) say high inflation has made their properties’ ongoing operational costs difficult to manage. 

Some landlords have already taken action to mitigate the damage caused by the challenging economic climate. 17% have already or are planning to sell off office buildings to remain buoyant, while a fifth (20%) have been forced to make redundancies in the past two years.

Despite these challenges, many landlords expressed optimism for the future of the market, with half (50%) of respondents feeling confident in the financial performance of their office building portfolios over the next five years. Meanwhile, 61% believe office occupancy rates will increase over the same period of time.

Wybo Wijnbergen, CEO of infinitSpace, said: “Office landlords are facing a worrying array of financial challenges. The high cost of borrowing has put immense pressure on the industry, only compounded by high inflation, which has made operational costs difficult to manage.

“So, it’s no surprise that many feel uncertainty about the current state of affairs for their portfolios.

“The intent of sharing this research is not to fearmonger, but to raise awareness and highlight that, despite these challenges, hope is not lost. In fact, as many respondents seem to recognise, the office market has a bright future ahead.

“We must remember that redundancies and closures may protect a portfolio in the short term, but they won’t address the root cause – landlords have plenty of other tools in their kit to futureproof their assets.

“A strategic, future-focused approach that taps into market demand is key. Looking into converting underutilised properties into other real estate types with the help of third-party providers can equip landlords to thrive in the rapidly evolving workspace landscape, helping them secure a more stable financial future.”

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