The COVID-19 pandemic has ended but the economic fallout is ongoing in some sectors of the economy, including commercial real estate.
Owners and lenders invested in downtown office space are feeling the effects of rising national office vacancy rates that are not expected to peak until late next year. The ongoing pressures of growing remote work and rising borrowing costs are dampening demand in most urban areas, including Providence.
But as this week’s cover story reports, the state and its capital city so far have fared better than many overbuilt areas.
Office vacancy rates have remained stable in recent months as the workforce has slowly returned.
Alden Anderson Jr., senior vice president for the Providence office of CBRE Group Inc., does, however, expect those local rates to rise this year.
As vacancies rise, cash flow decreases and property values eventually fall. Add ever-rising borrowing costs to the mix and the risk of loan defaults grows.
Paolino Properties LP Managing Partner Joseph R. Paolino Jr. is concerned about how bad things may get locally. But he’s not sitting on his hands waiting to find out.
He’s continued to shore up his holdings in response to changing market demands. The latter includes the recently completed $20 million conversion of Providence’s Studley Building into housing units.
He’s also working with local banks now on a large mortgage payment not due until February. “Get ahead of the problem,” he told PBN.
That’s sound strategy from a survivor intent on being at the forefront of the downtown’s post-pandemic recovery.