Office landlords struggling for tenants are facing an even scarier predicament — zombie properties
, making it useful once again — though the custom-construction methods often needed to install new parts in an old structure is a little like piecing together Frankenstein's monster.
The Flatiron and buildings like it have become unrentable — and therefore dead — because the lofty valuations made possible by the ultralow interest rates of the past have dropped, reducing owners' equity. Cohen said that at today's lower leasing rates, the owners — who have less skin in the game — can't justify their costs.
The rising number of zombie properties is the latest and a dire chapter of the crisis in commercial office real estate — a sector that is experiencing a double whammy of rising interest rates and rising vacancies. Pressure from One factor is that it's expensive to sign an office deal. Cohen estimated that it costs up to $200 a square foot in New York when combined with the cost of outfitting and improving space for a tenant, as well as broker, legal, and other fees. Landlords cannot cut these costs.
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