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close video Commercial real estate industry on edge as downtown empty office space goes unused

Some financial analyst worry that the commercial real estate industry is in danger due to the increase of vacant office space with the rise of remote work.

Some Morgan Stanley financial analysts say the commercial real estate industry could be headed for a crisis worse than the 2008 great recession. This comes after businesses have left downtowns across the country with an increase in remote work and higher interest rates. 

Many downtown buildings are owned by investment firms who rely on bank loans. But with businesses not renting as much office space and rising interest rates, some worry these firms may not have the money to pay back the banks.  

In downtown Minneapolis, people are returning to see the Minnesota Twins play ball, attend a concert or catch a Broadway show. 

"As we sit here today, we're really beginning to move in a positive direction," Steve Cramer, president and CEO of the Minneapolis Downtown Council and Downtown Improvement District, said. "Like all downtowns, that pandemic hit like a ton of bricks and things really shut down. Then we of course, had the murder of George Floyd here in our city and that caused civil unrest here, and had implications around the country, around the globe. And so we've really been kind of working our way back from that set of events in 2020." 

INVESTORS RETREAT FROM COMMERCIAL REAL ESTATE BONDS 

Employees working in downtown Minneapolis use the skywalk to avoid the chilly weather. The Minneapolis Downtown Council says about 65% of people are coming into the office at least once a week, up from 50% in 2022. (Mills Hayes/Fox News / Fox News)

Cramer worries about the office buildings that are 30 to 40 years old. 

"We have to focus some attention on what can a new life for those buildings be? Maybe they can be converted into residential units," Cramer said. "The newer buildings with amenities, I think are going to do just fine in attracting the office demand."

Last week AT & T announced it was leaving downtown Minneapolis for the suburbs.  

"The move will be complete by the end of August, allowing us to use our office space more effectively. It’s important to note that these jobs will remain in the greater Minneapolis area, and we remain committed to Minnesota," Clay Owens, director of public relations for AT&T, said. 

Andy Babula is the Director of the Real Estate Program and the Shenehon Center for Real Estate at the University of St. Thomas. 

"People are working from home a lot more now. If they do want to go into the office, they're going to want somewhere nearby," Babula said about the decision to move to the suburbs where many employees tend to live. 

CBRE Global Commercial Real Estate Services says office vacancy rose during the 2008 financial crisis, but it was led by a recession. This rise is vacant office space is driven by a structural shift from the pandemic to remote work. (Fox News / Fox News)

According to CBRE Global Commercial Real Estate Services, in New York City there has been a 7.6% increase in empty office space since the pandemic. In Seattle, an 8.2% increase and in San Francisco, a whopping 25.4% increase. 

COMMERCIAL PROPERTY DEBT CREATES MORE BANK WORRIES 

CBRE says that San Francisco has a large amount of tech tenants, and they have viewed returning to work in person differently. Many employees are asked to come back to work on a more voluntary basis, which explains why they saw such a sharp increase in empty office space in comparison to other cities.

People who live in downtown Minneapolis say empty office space surrounds them. (Mills Hayes/Fox News / Fox News)

In Minneapolis, there’s only been a 2.1% increase in empty space, but some worry the problem could get worse.  

"If the pandemic started three years ago, people may still have a few years left on their lease. So, over the next couple of years, we are going to be seeing these leases expire and companies as they expire will likely either vacate or downsize," Babula said. 

Babula also said there is concern that the value of the buildings will decrease and impact the tax base. 

US REAL ESTATE HAS ‘MONUMENTAL OPPORTUNITY’ TO SOLVE HOUSING CRISIS IN 2023: EXPERT

"The city like Minneapolis is going to collect less taxes from every building downtown if its value is lower by 20 to 30%. That's less taxes in their pocket, and that has to then get shifted to others in the city, to the residents and other businesses throughout the city. So that's a concern as well," Babula said. 

With less demand for office space, investment firms who own these downtown buildings may not have enough money to pay off their loans to the banks.  

In quarter one of 2020, Seattle had 9.4% of empty office space in downtown. By 2023, that number has grown to 17.6 % of empty office space. (Fox News / Fox News)

"Do we believe that we're going to see defaults? Absolutely. Are we keeping a close eye on the banks that hold a lot of these loans? Absolutely, but generally we believe that we are going to be able to come through the other end of this with some scratches and bruises, but nothing that is going to drive the collapse of the banking system," Julie Whelan, head of global head of occupier thought leadership at CBRE, said.  

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Whelan said downtowns are not dying by any means, they're just going through an evolution right now. Many are shifting towards a footprint of more residential, retail and entertainment to make up for the office crowds leaving.  

"If the different sides of the private sector and the public sector can come together and create an impetus drive to change in our cities that we’ll actually come out feeling stronger when we look ahead 10 years from now," Whelan said.

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Blue Origin launch: Is Jeff Bezos chasing down Elon Musk in the billionaire space race?

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Blue Origin launch: Is Jeff Bezos chasing down Elon Musk in the billionaire space race?

Jeff Bezos’s Blue Origin is set for the inaugural launch of its new space rocket on Monday in a development that could add more fuel to the billionaire space race.

The New Glenn rocket is due to blast off from Cape Canaveral – the result of a multi-billion dollar, decade-long effort that could set the stage for Amazon’s satellite constellation venture and dent Elon Musk’s market share.

Mr Musk’s SpaceX has dominated the scene for many years but both Mr Bezos and Virgin Galactic founder Sir Richard Branson have designs on outer space… and the wealth tied up in its exploration.

New Glenn on the launch pad in December. Pic: Blue Origin
Image:
New Glenn on the launch pad in December. Pic: Blue Origin

Jeff Bezos and Blue Origin

“Ever since I was five years old, I’ve dreamed of traveling to space,” Mr Bezos said ahead of his journey to the edge of space in 2021.

He founded the Blue Origin venture with the aim of having “millions of people working and living in space”.

For years it has launched – and landed – its reusable New Shepard rocket to and from the brim of Earth’s atmosphere, but has never sent anything into orbit. That could all change on Monday.

Jeff Bezos, owner of The Washington Post, delivers remarks at the grand opening of the Washington Post newsroom in Washington January 28, 2016. REUTERS/Gary Cameron
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Jeff Bezos, founder of Blue Origin and Amazon. Pic: Reuters

Blue Origin will be hoping its New Glenn rocket will be able to compete with SpaceX’s Falcon 9, the world’s most active rocket.

Compared to Mr Musk’s Falcon 9, the New Glenn is about twice as powerful and its payload bay diameter is two times larger in order to fit bigger batches of satellites.

The upcoming launch is also a key certification flight required by the US Space Force before New Glenn can launch national security payloads as part of multi-billion dollar government tenders Blue Origin hopes to win.

A SpaceX Falcon Heavy rocket lifts off for the Europa Clipper mission to study one of Jupiter's 95 moons, at Kennedy Space Center in Cape Canaveral, Florida, U.S. October 14, 2024. REUTERS/Joe Skipper
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A SpaceX Falcon Heavy rocket lifts off in October 2024. Pic: Reuters

Elon Musk and SpaceX

“I want to die on Mars – just not on impact,” Elon Musk once quipped.

The Donald Trump ally, who is frequently pictured wearing an “Occupy Mars” shirt, has enjoyed relative dominance of the private space industry through his company SpaceX.

Back in 2016, Mr Musk outlined his vision of building a colony on Mars “in our lifetimes” – with the first rocket propelling humans to the Red Planet by 2025, though this deadline does not appear likely to be met.

Mr Musk and Mr Trump speak at launch of SpaceX Falcon 9 rocket at NASA's Kennedy Space Centre in 2020. Pic: Reuters
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Elon Musk and Donald Trump speak at a SpaceX launch in 2020. Pic: Reuters

For many years the company used an image of the Martian surface being terraformed (turned Earth-like) in its promotional material. However, a NASA-sponsored study published in 2018 dismissed these plans as impossible with the technology available then.

SpaceX missions have included both US government contracts and launching the company’s Starlink satellite internet network.

And while Mr Bezos’ New Glenn rocket is much more powerful than the successful Falcon 9, SpaceX’s next-generation Starship, a fully reusable rocket system currently in development, would be more powerful still.

Mr Musk sees Starship as crucial to expanding Starlink’s footprint in orbit. Its next test flight is expected later this month and will involve deploying mock satellites.

Read more:
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 Sir Richard Branson
Image:
Sir Richard Branson. Pic: Reuters

Sir Richard Branson and Virgin Galactic

Also seeking a stake in the upper atmosphere is Virgin founder Sir Richard, whose Virgin Galactic effort took its first tourists to the edge of space in 2023.

The crew took the passengers about 55 miles (88km) above Earth where they experienced zero gravity during the flight which lasted just over an hour.

“My mum taught me to never give up and to reach for the stars,” the British billionaire once said.

The company is currently taking a pause from flights as it develops new space vehicles, Forbes reported in October last year.

Its new fleet of Delta vehicles are scheduled to resume commercial spaceflight by 2026.

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Duchess of Sussex delays release of Netflix series due to LA fires

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Duchess of Sussex delays release of Netflix series due to LA fires

The Duchess of Sussex has delayed the release of her new Netflix series due to the devastation caused by the wildfires in LA, the streaming platform has announced.

Meghan’s eight-part series, With Love, will premiere on 4 March instead of 15 January.

“I’m thankful to my partners at Netflix for supporting me in delaying the launch, as we focus on the needs of those impacted by the wildfires in my home state of California,” Meghan said in a statement to Tudum, the official companion site to Netflix.

Harry and Meghan comforted volunteers and handed out food to evacuees during a visit to Pasadena on Friday, where they met with the city’s mayor Victor Gordo and emergency workers tackling the Eaton Fire.

Prince Harry and Meghan Markle Volunteering in Pasadena on 11/01/25
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Prince Harry and Meghan were seen comforting residents on Friday

Footage showed the duchess, wearing a blue “LA” baseball cap, and the prince hugging and consoling people who had fled to the Pasadena Convention Center.

Latest on LA fires

They were also seen speaking Doug Goodwin, whose home was destroyed in the wildfires, and also to Jose Andres, founder of World Central Kitchen (WCK) which has been helping feed the public and emergency crews.

Prince Harry and Meghan speak to Pasadena mayor Victor Gordo in Altadena, California. Pic: AP
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Prince Harry and Meghan spoke to Doug Goodwin (centre right), whose home was destroyed and Pasadena mayor Victor Gordo (right) in Altadena, California. Pic: AP

A description of the Netflix series on Tudum’s website said: “Produced by Meghan, ‘With Love, Meghan’ blends practical how-to’s and candid conversation with friends, new and old.

“Meghan shares personal tips and tricks, embracing playfulness over perfection, and highlights how easy it can be to create beauty, even in the unexpected.

“She and her guests roll up their sleeves in the kitchen, the garden, and beyond, and invite you to do the same.”

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The royals live in Montecito, near Santa Barbara, around 90 miles from Los Angeles.

They are understood to have donated supplies, including clothing and children’s items, to people affected by the disaster.

They released a statement on Thursday urging people to help those affected by the wildfires and to open their homes to those evacuated.

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Technology

Britain seeks to build homegrown rival to OpenAI in bid to become world leader in artificial intelligence

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Britain seeks to build homegrown rival to OpenAI in bid to become world leader in artificial intelligence

Britain’s Prime Minister Keir Starmer gives a media interview while attending the 79th United Nations General Assembly at the United Nations Headquarters in New York, U.S. September 25, 2024.

Leon Neal | Via Reuters

LONDON — The U.K is looking to build a homegrown challenger to OpenAI and drastically increase national computing infrastructure, as Prime Minister Keir Starmer’s government sets its sights on becoming a global leader in artificial intelligence.

Starmer is set to visit Bristol, England, on Monday to announce the pledge, which follows work done by British tech investor Matt Clifford to establish an “AI Opportunities Action Plan.” The plan aims to help the U.K. take advantage of the potential of AI.

The government is primarily seeking to expand data center capacity across the U.K. to boost developers of powerful AI models which rely on high-performance computing equipment hosted in remote locations to train and run their systems.

A target of increasing “sovereign,” or public sector, compute capacity in the U.K. by twentyfold by 2030 has been set. As part of that pledge, the government will begin opening access to the AI Research Resource, an initiative aimed at bolstering U.K. computing infrastructure.

Starmer’s administration last year canceled £1.3 billion of taxpayer-funded spending commitments towards two significant computing initiatives in order to prioritize other fiscal plans. The projects, an AI Research Resource and a next-generation “exascale” supercomputer, were pledges were made under Starmer’s predecessor, Rishi Sunak.

Sovereign AI has become a hot topic for policymakers, particularly in Europe. The term refers to the idea that technologies critical to economic growth and national security should be built and developed in the countries people are adopting them in.

To further bolster Britain’s computing infrastructure, the government also committed to setting up several AI “growth zones,” where rules on planning permission will be relaxed in certain places to allow for the creation of new data centers.

Meanwhile, an “AI Energy Council” formed of industry leaders from both energy and AI will be set up to explore the role of renewable and low-carbon sources of energy, like nuclear.

Why Amazon, Microsoft, Google and Meta are investing in nuclear power

Building a challenger to OpenAI

The last major initiative the U.K. government proposed was to create homegrown AI “champions” of a similar scale to American tech giants responsible for the foundational AI models that power today’s generative AI tools such as OpenAI’s ChatGPT.

Britain plans to use the AI growth zones and a newly established National Data Library to connect public institutions — such as universities — to enhance the country’s ability to create “sovereign” AI models which aren’t reliant on Silicon Valley.

It’s worth highlighting that the U.K. faces serious challenges in its bid to create an effective OpenAI alternative. For one, several entrepreneurs in the country have bemoaned funding challenges that make it difficult for startups in the country to raise the kind of cash available to AI success stories.

Many U.K. founders and venture capitalists have called for the country’s pension funds to allocate a greater portion of their portfolios toward riskier, growth-focused startups — a reform the government has committed to pushing previously.

“In the U.K., there’s $7 trillion in this pocket,” Magnus Grimeland, CEO and founder of venture capital firm Antler, told CNBC in an interview last year. “Imagine if you take just 5% of that and allocate it to innovation — you solve the problem.”

U.K. tech leaders have nevertheless generally praised the government’s AI action plan. Zahra Bahrololoumi, Salesforce’s U.K. boss, told CNBC the plan is a “forward-thinking strategy,” adding she’s encouraged by the government’s “bold vision for AI and emphasis on transparency, safety and collaboration.”

Chintan Patel, Cisco’s chief technology officer in the U.K., said he’s “encouraged” by the action plan. “Having a clearly defined roadmap is critical for the UK to achieve its ambition to become an AI superpower and a leading destination for AI investment,” he said.

Britain doesn’t yet have formal regulations for AI. Starmer’s government has previously said it plans to draw up legislation for AI — but details remain thin.

Last month, the government announced a consultation on measures to regulate the use of copyrighted content to train AI models.

More generally, the U.K. is pitching a differentiated regulatory regime from the EU following Brexit as a positive factor — meaning, it can introduce regulatory oversight for AI but in a way that’s less strict than the EU, which has taken a more hard-line approach to regulating the technology with its AI Act.

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