SAN FRANCISCO—Between all-time low hotel occupancy rates, fizzled retail rent payments, and an increase in office rent abatements and lease extensions, one thing has become evident across the commercial real estate landscape: capital expenditure spending is frozen, says Harris Cohn, vice president of commercial real estate with Carbon Lighthouse. Public first quarter 2020 REIT investor reports reveal approximately $600 million of previously announced capex spending in 2020 will be deferred.

For example, one office REIT ranked in the top 10 in terms of market value announced in fourth quarter 2019 it would spend approximately $500 million on development and repositioning to earn a 5 to 7% yield. At the end of first quarter 2020, the REIT announced it would put $73 million in "discretionary capex" previously planned for the rest of 2020 on hold.

"Based on the age of most US commercial buildings, many capex budgets were originally directed towards modernization of existing assets to reposition the property for increased rents," Cohn tells GlobeSt.com. "But now, real estate owners need to make difficult choices between investing in existing assets, forgiving rent and making debt service payments."

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Lisa Brown

Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.