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1. $1.5 Trillion in Commercial Real Estate Debt Looms
Nearly $1.5 billion in U.S. commercial real estate debt will reach maturity by the end of 2025, Bloomberg reports. Further complicating matters are the deposit outflows at small and regional banks following the fall of Silicon Valley Bank.
“Refinancing risks are front and center” for owners of commercial real estate, Morgan Stanley analysts wrote in a note this past week. “The maturity wall here is front-loaded. So are the associated risks.”
2. Corporate Travel Spending on Recovery Path
A study by Deloitte found that corporate travel spending is on pace to fully recover to 2019 levels by 2024 or 2025, reports Business Travel News. The study found spending volume should reach roughly 57% of 2019 levels in the first half of 2023, reaching about 75% by the end of the year.
The higher cost of travel and climate concerns will lead to smaller trip volumes compared to pre-pandemic levels. Though a full recovery in business travel spending is possible by the end of 2024, it will remain about 10% to 20% below pre-pandemic levels when taking inflation into account.
3. Owners, Brands Negotiate Hotel Renovations
Hotel brands are eager for owners to get back to back to the traditional schedule for property improvement plans, but owners are still trying to build back the reserves they spent during the pandemic to stay afloat. Hotel asset managers said despite the pressure from brands, owners have room to negotiate on renovations to prioritize return on investment, reports HNN's Bryan Wroten.
“I think the brands are willing to be more flexible in timing and phasing in the approach to a project,” said said Chad Sorensen, managing director and chief operating officer at CHMWarnick. “There’s been no time like now where the brand and owners need to work together. They’re never going to agree on all of it. Generally speaking, everybody’s trying to be collaborative and accomplish everybody’s goals in a period where it’s just really challenging.”
4. Labor Shortage Stymies Construction Projects
As the U.S. construction industry has remained in high demand for industrial, commercial and other nonresidential projects, the labor shortage is holding back construction’s potential capacity for more work, the Wall Street Journal reports. Spending on nonresidential construction in February reached $982 billion, almost 17% higher than a year before.
The U.S. Bureau of Labor Statistics reported that the number of U.S. nonresidential construction workers increased by 3.3%, or 149,100 workers, year over year in March, the newspaper reports. The number of construction workers was 8.6% higher in 2022 than in 2019.
“I’ve got more work to look at and bid on than I could possibly handle,” said Jeff Harper, president of Harper Construction Co. in San Diego. “I’ve said ‘no’ to 10 jobs in the last four months.”
5. Companies Outsource Remote Work Positions
Many U.S. businesses are outsourcing remote work positions to fill empty seats and offset increasing labor costs, the Wall Street Journal reports. While outsourcing jobs overseas isn’t a new concept, more companies are now moving their higher-skilled jobs, such as software developers, human resources professionals and payroll administrators.
“1980 to 2019 was the rise of manufacturing globalization, which eventually stalled out with the China-U.S. trade war,” said Nicholas Bloom, an economist at Stanford University. “From 2020 onwards we will see the era of service sector globalization.”