Office Vacancies Hit Record Highs Amid Lasting Pandemic Impact

[] [View in browser]( [View in browser]( [] JULY 3, 2024 [] [] PROSPERITY PUB MARKET TALK Office Vacancies Hit Record Highs Amid Lasting Pandemic Impact Office vacancies have set a new record, crossing the 20% mark for the first time in history. According to a recent analysis by Moody’s, the office sector's vacancy rate reached 20.1% in the second quarter of this year. The Federal Reserve's multiple rate hikes to control inflation have indeed made commercial real estate investments more expensive and challenging. But the deeper and more lasting issue is the permanent shift in work habits brought about by the pandemic. The pandemic forced many businesses to adopt remote work, and even as the world has gradually returned to normal, this shift has largely stuck. Remote work has become a permanent feature for many companies, reducing the demand for traditional office spaces. Ross Perot Jr., chairman of the Perot Group and Hillwood, summed it up well when he said, “It broke the habit patterns of millions of people that used to go to work every day in a real office.” Our own Nate Tucci has echoed these concerns, noting, "The real estate market might just be in some serious trouble. Back in 2008, Wall Street was bundling riskier and riskier mortgages into investments called Mortgage-backed securities (MBS) and collateralized loan obligations (CLS). And people were buying them like hotcakes. The idea was if you put enough of the risky investments together, they can't all possibly fail, right? We saw how well that worked…" The office sector is particularly vulnerable now because the shift to remote work appears to be a permanent one. This enduring change in work behavior means that demand for office space may never return to pre-pandemic levels. As a result, rents are falling, and landlords are struggling to fill vacant spaces. In the second quarter of the year, effective rents fell by 0.1%, marking the fourth consecutive quarter of either negative or flat rent growth. Net absorption, which measures the total amount of space that has been leased minus the amount vacated, was at -13.6 million square feet in the second quarter — the worst it has been in nearly three years. Our friend Jeffry Turnmire has also been warning of a looming commercial real estate problem for months. He cautions that banks will be left holding the loans for abandoned properties now worth a fraction of their loan value — and that a mass scenario like that could potentially trigger a massive banking crisis. As we look ahead, it’s clear that the office market faces significant challenges. While interest rates may eventually come down, the fundamental issue of reduced demand for office space due to changes in work habits seems to be here to stay. his ongoing struggle in the office sector underscores the importance of staying informed and adaptable in our trading strategies. — The Prosperity Pub Team [] [] Half-Off 4th of July Sale! Stanford calls it “the most overlooked ticker” And one expert trader is using this ticker to leverage the U.S. national debt to create monthly income like never before! [Discover the power of trading TLT — and get a special $1000 discount — now!]( [] [] GEOF SMITH’S TAKE The Hidden Costs Behind Falling Lumber Prices Earlier this week, I delved into the rising shipping costs and their potential to kick off another round of inflation. We looked at the issues in the Panama and Suez Canals and how these are affecting the prices of goods and services. Today, I want to expand on this by discussing another critical area impacted by these rising costs: the lumber market. Impact On The Lumber Market And Housing Sector While shipping costs are a big concern, other areas of the economy are feeling the strain, too. One area is the lumber market. Lumber prices have been falling since March of last year and are now below pre-pandemic levels. But, the cost of labor and trucking has significantly increased. Many lumber mills are losing money at today’s prices — and if this trend continues, we could see mill shutdowns or large layoffs of skilled workers. Usually, this time of year sees an increase in lumber prices due to high demand from home builders. [But this year, relief is nowhere in sight…]( — Geof Smith [] [] [] [] JULY 3, 2024 [] [] PROSPERITY PUB MARKET TALK Office Vacancies Hit Record Highs Amid Lasting Pandemic Impact Office vacancies have set a new record, crossing the 20% mark for the first time in history. According to a recent analysis by Moody’s, the office sector's vacancy rate reached 20.1% in the second quarter of this year. The Federal Reserve's multiple rate hikes to control inflation have indeed made commercial real estate investments more expensive and challenging. But the deeper and more lasting issue is the permanent shift in work habits brought about by the pandemic. The pandemic forced many businesses to adopt remote work, and even as the world has gradually returned to normal, this shift has largely stuck. Remote work has become a permanent feature for many companies, reducing the demand for traditional office spaces. Ross Perot Jr., chairman of the Perot Group and Hillwood, summed it up well when he said, “It broke the habit patterns of millions of people that used to go to work every day in a real office.” Our own Nate Tucci has echoed these concerns, noting, "The real estate market might just be in some serious trouble. Back in 2008, Wall Street was bundling riskier and riskier mortgages into investments called Mortgage-backed securities (MBS) and collateralized loan obligations (CLS). And people were buying them like hotcakes. The idea was if you put enough of the risky investments together, they can't all possibly fail, right? We saw how well that worked…" The office sector is particularly vulnerable now because the shift to remote work appears to be a permanent one. This enduring change in work behavior means that demand for office space may never return to pre-pandemic levels. As a result, rents are falling, and landlords are struggling to fill vacant spaces. In the second quarter of the year, effective rents fell by 0.1%, marking the fourth consecutive quarter of either negative or flat rent growth. Net absorption, which measures the total amount of space that has been leased minus the amount vacated, was at -13.6 million square feet in the second quarter — the worst it has been in nearly three years. Our friend Jeffry Turnmire has also been warning of a looming commercial real estate problem for months. He cautions that banks will be left holding the loans for abandoned properties now worth a fraction of their loan value — and that a mass scenario like that could potentially trigger a massive banking crisis. As we look ahead, it’s clear that the office market faces significant challenges. While interest rates may eventually come down, the fundamental issue of reduced demand for office space due to changes in work habits seems to be here to stay. his ongoing struggle in the office sector underscores the importance of staying informed and adaptable in our trading strategies. — The Prosperity Pub Team [] [] Half-Off 4th of July Sale! Stanford calls it “the most overlooked ticker” And one expert trader is using this ticker to leverage the U.S. national debt to create monthly income like never before! [Discover the power of trading TLT — and get a special $1000 discount — now!]( [] [] GEOF SMITH’S TAKE The Hidden Costs Behind Falling Lumber Prices Earlier this week, I delved into the rising shipping costs and their potential to kick off another round of inflation. We looked at the issues in the Panama and Suez Canals and how these are affecting the prices of goods and services. Today, I want to expand on this by discussing another critical area impacted by these rising costs: the lumber market. Impact On The Lumber Market And Housing Sector While shipping costs are a big concern, other areas of the economy are feeling the strain, too. One area is the lumber market. Lumber prices have been falling since March of last year and are now below pre-pandemic levels. But, the cost of labor and trucking has significantly increased. Many lumber mills are losing money at today’s prices — and if this trend continues, we could see mill shutdowns or large layoffs of skilled workers. Usually, this time of year sees an increase in lumber prices due to high demand from home builders. [But this year, relief is nowhere in sight…]( — Geof Smith [] [] [] [] ABOUT US: We believe that the opportunity for financial literacy and freedom belongs to all people, not just those who already have years of investing experience. Prosperity Pub provides an array of educational services and products that will help you navigate the markets and become a better investor. Trading is made simple through our online forum full of trading techniques to give you the best tools to kick-start your investing journey. We offer collaborative webinars and training; we love to teach. No matter the opportunity, we bring together a strong community of like-minded traders to focus on analyzing market news as it’s presented each day. DISCLAIMER: FOR INFORMATION PURPOSES ONLY. The materials presented from Prosperity Pub are for your informational purposes only. Neither Prosperity Pub nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational purposes intended is at the user’s own risk. DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. Prosperity Pub is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions. Please visit [( for our full Terms and Conditions. [Unsubscribe]( This email was sent to {EMAIL} by Prosperity Pub 101 Marketside Ave, Suite 404 PMB 318, Ponte Vedra, Florida 32081, United States [Prosperity Pub]( [] ABOUT US: We believe that the opportunity for financial literacy and freedom belongs to all people, not just those who already have years of investing experience. Prosperity Pub provides an array of educational services and products that will help you navigate the markets and become a better investor. Trading is made simple through our online forum full of trading techniques to give you the best tools to kick-start your investing journey. We offer collaborative webinars and training; we love to teach. No matter the opportunity, we bring together a strong community of like-minded traders to focus on analyzing market news as it’s presented each day. DISCLAIMER: FOR INFORMATION PURPOSES ONLY. The materials presented from Prosperity Pub are for your informational purposes only. Neither Prosperity Pub nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational purposes intended is at the user’s own risk. DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. Prosperity Pub is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions. Please visit [( for our full Terms and Conditions. [Unsubscribe]( This email was sent to {EMAIL} by Prosperity Pub 101 Marketside Ave, Suite 404 PMB 318, Ponte Vedra, Florida 32081, United States [Prosperity Pub](