[세계 경제 고금리 후유증]〈2〉 Frozen consumer-asset markets in each country
La Défense, the representative commercial district of Paris… The commercial sector collapsed due to high prices and prices plummeted.
One out of three stores on the first floor of Wangjing Soho in China is closed.
Global real estate companies ‘stumble’ in debt crisis… “Liquidity Banquet Bill in Low Interest Rate Period”
‘We are organizing inventory. 50% off plus an additional 10% off when you purchase 2 or more items.’
On the 20th of last month (local time), La Défense shopping mall outside Paris, France. A large advertisement with this phrase was posted in the window of the men’s clothing store ‘Caporal’ in the center of the shopping mall. It was only four days before ‘Black Friday’, but office workers were not even seen doing ‘niche shopping’ during their lunch hour. Mr. Balintan Jeanti, the owner of the store who was running the store alone, said, “I have been doing business here for 10 years, but now I really can’t hold on, so I am closing the store in a month.” The decision was made to close the business at the end of the year. This store has seen a 30% decrease in customers compared to before the novel coronavirus infection (Corona 19).
There are inventory clearance and sale signs hanging all over the shopping mall, but the situation is similar. Due to lack of business, a total of 12 out of about 100 stores, including 2 in the center, remain vacant. There were also business closure notices posted here and there.
La Défense was an abandoned place on the western outskirts of Paris, but since the late 1980s, it has been transformed into a new commercial district with the construction of about 10 high-rise buildings over 150 meters tall. As the number of tourists visiting modern buildings and shopping malls increased, it was also selected as a model example of urban redevelopment.
However, as telecommuting increased due to COVID-19, the surrounding commercial area began to stagnate. The vacancy rate in the La Defense region soared to 15.7% last year. To make matters worse, the city’s commercial district completely collapsed and real estate prices plummeted as consumption by Parisians and tourists decreased due to high interest rates and high prices.
This phenomenon is being witnessed all over the world. In ‘Wangjing Soho’, a landmark commercial building in Beijing, China, one in three stores on the first floor of Tower 1, which has the most traffic, was closed. The average vacancy rate in the Beijing area in the third quarter of this year (July to September) reached 19.5%. A clerk working at a convenience store in Wangjing Soho said, “There are more people coming and going than during COVID-19, but it’s hard to find people opening their wallets.”
WeWork in the U.S. takes down its sign On the 28th of last month (local time), the site of the old WeWork branch in the Meatpacking area of Manhattan, New York, USA. New York = The US real estate market has become even colder. The fall of WeWork, an icon of the sharing economy that once had a corporate value of $47 billion, is a symbolic example of that crisis. WeWork’s debt, including the Meatpacking building in Manhattan, New York, overdue rent in the U.S. and Canada, and litigation costs related to lease agreements, amounts to $18.7 billion. WeWork, which operated 47 branches in New York alone, is seeking to terminate lease contracts for 35 branches. An official from a real estate brokerage in New York, USA said, “There is a possibility that the prices of buildings with WeWork as a landlord will fall due to various lawsuits and vacancies,” adding, “It is like pouring cold water on the falling prices of surrounding real estate due to high interest rates and high vacancy rates.” “He said.
This is not the only crisis in the asset market caused by high interest rates and high inflation. Cigna Group, an Austrian real estate and distribution company that owns global landmark buildings, including the Chrysler Building in New York, USA, also filed for bankruptcy on the 29th of last month. In August of this year, the real estate industry in Asia was shaken as the default crisis of Chinese real estate developer Biguiyuan (Country Garden) became a reality.
The crisis in consumer markets and real estate companies in each country has become a boomerang due to aggressive borrowing management that caused excessive leverage in a period of low interest rates. The decline in consumption due to high interest rates and high prices is also aggravating this crisis. Department stores and shopping malls continue to decide to close branches as profits decline. As a result, additional vacancies occur and commercial real estate prices in major cities fall, creating a vicious cycle. One of the reasons why real estate price recovery is expected to be slow is the phenomenon of urban hollowing out as non-face-to-face work has become established after COVID-19 and consumption patterns using online platforms have become routine.
Dong-Hyeon Ahn, a professor of economics at Seoul National University, said, “Bills are coming in for the liquidity feast during a period of low interest rates,” and predicted, “The crisis in commercial real estate along with a downturn in consumption will continue until at least the second half of next year due to the impact of high interest rates and high inflation.”
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Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.