Hertz Properties Struggle Reflects the Broader Plight of Downtown Offices

Propmodo Daily

Greetings!

Hertz Properties Group, a major downtown U.S. office owner, is facing financial difficulties due to high vacancies, reduced leasing, increased costs, and declining central business district office values, prompting a financial reorganization and raising concerns about its future. Plus, as hybrid work becomes the norm, multifamily developments are adding co-working spaces to meet renters' growing demand for thoughtfully designed work-from-home amenities. Also, with interest rates dropping, real estate owners face added complexity in multifamily financing; join our October 10th Propmodo Live webinar to hear from experts on bridging, HUD, and Commercial Property Assessed Clean Energy (C-PACE) strategies.

Now, let’s dig in!

Hertz Properties Struggle Reflects the Broader Plight of Downtown Offices

An entity controlled by one of the largest owners of downtown U.S. office properties has significant doubts about its continued existence. Hertz Properties Group broke that news in a recent regulatory filing and has hired a chief restructuring officer to oversee its financial reorganization.

Hertz Properties is part of Hertz Investment Group, the 25th largest owner of central business district office buildings in the U.S. Hertz Properties used roughly $200 million in bonds issued on Israel’s Tel Aviv Stock Exchange to finance eleven U.S. office properties. Those bonds are only partially repaid, and bondholders will soon meet to discuss their redemption.

Hertz Properties owns nine U.S. office buildings, accounting for approximately four million square feet, of which 33 percent is vacant. The company said in the regulatory filing that its struggles are due to reduced office leasing, increased operating costs, and high interest rates.

Hertz Properties’ concentration of office buildings in downtown districts may be its biggest challenge. According to MSCI, Inc., office values in central business districts have fallen 52 percent from pre-pandemic highs across the U.S. The drop in values from the peak is much smaller (18 percent) in U.S. markets classified as suburban or areas outside the traditional core.

Central business districts were hit hard by the pandemic, and nearly five years later, they haven’t fully recovered. In particular, downtown offices are struggling for myriad reasons. 

In an era of office flight to quality, JLL reports that about 88 percent of office properties in downtown districts were built before 2015. Long commutes have also made downtown offices less appealing.

Hertz Properties' difficulties reflect a larger trend affecting offices in central business districts nationwide. To remain competitive in a post-pandemic landscape, downtown office spaces and their districts may need complete reinvention. Achieving this vision will require a collaborative effort from cities and office owners, forcing them to rethink the central business district model.

Raise capital faster with Agora

In just two quarters, Helu Capital increased their equity raised by 300% with Agora. They effectively marketed new investment opportunities, organized leads efficiently, and provided investors with seamless, customized online subscriptions. They also reduced subscription time by 50% while enhancing investor relations.

With Agora they were able to streamline their operations and achieve operational efficiency allowing them to focus on what matters most - growth.

Discover real growth with Agora.

Showcase

Propmodo Technology: Energy Management

Insider Insights

CoStar can Move on
The judge presiding over the trade secret case between CoStar and Move.com has agreed to CoStar’s request for dismissal, saying that there is no evidence of a connection between Move’s former employee and CoStar’s SEO efforts.

Moisture matters
A startup just raised $4 million for its paint solution that can help buildings reduce moisture in a building by absorbing humidity.

Headlines

September 22, 2024 | Bloomberg
Unlocking the Hidden Power of Zoning, for Good or Bad

September 23, 2024 | Technology Networks
Engineers Develop 3D-Printed Glass Bricks As Strong As Concrete for Building Structures

September 21, 2024 | Business Insider
The Rate Cut Won’t Save These Real-Estate Owners

Overheard

More Newsletters

Are You Enjoying This Newsletter?

Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

📧 Forward it to a friend and suggest they check it out.

🔗 Share a link to this post on social media.

🗣 Have ideas for future topics (or just want to say hello)? Share your feedback and tips at [email protected] or connect with us on X through @propmodo.

✅ Not subscribed yet? Sign up for this newsletter here.

📫️ Please add our newsletter email, [email protected], to your contacts to make sure you don’t miss any updates.

Explore Propmodo

• Read exclusive articles about a variety of topics, including Real Estate, Workplace, Buildings, and Development.

• Browse our collection of interactive Propmodo Research e-books.

• Sign up for upcoming Propmodo Live Webinars or watch past Propmodo Live videos on-demand.

• Dive into Propmodo Technology articles, podcasts, and short videos about the future of commercial real estate.

Enjoy reading about trends and innovation in commercial real estate? Subscribe to Propmodo.com for unrestricted access to reliable, data-driven journalism and exclusive insights available only to subscribers.