As the hype of return to office dies down, and the realities of increased vacancies—due to shifts towards hybrid and virtual work scenarios—become clear, commercial real estate firms are experiencing additional financial pressure, with defaults becoming more likely.
This reality will have a knock-on effect on how commuters travel to work and the methods in which transit agencies work to understand and adapt to adjusted travel patterns. Bloomberg’s John Gittelsohn adds detail on the commercial real estate situation:
“Some landlords are defaulting on debt as borrowing costs surge and the prospects of filling up office towers wanes given the rise in remote and hybrid work. Those trends have weighed on values, with prices on high-quality office properties falling about 25% in the past year, according to Green Street. About 4.8% of office properties with CMBS were managed by special servicers in March, up from 3.2% a year ago, according to Trepp.”
The Bloomberg article highlights Brookfield Corp. defaulting on a $161 million mortgage covering 12 separate properties in the transit rich Washington D.C. market. These realities are not lost on transit systems that are working to make postpaid options easier for occasional travelers. In Atlanta, The Metro Atlanta Rapid Transit Authority (MARTA) recently updated its mobile app system, with a greater push towards occasional riders. MARTA officials describe the push in an article in the Atlanta Voice:
“‘One of the most common customer requests is a way to conveniently pay for each ride as you go, rather than having to load a card or stand in line to buy a ticket at the ticket machines,” said MARTA Chief Customer Experience Officer Rhonda Allen. “This updated Breeze Mobile 2.0 app lets you pay-as-you-go. Just scan your phone on the bus or at the faregate and you’re on your way.’”
My recent Javelin Research & Strategy Impact Note, Return to Office Doesn’t Equal Return to Patterns in Prepaid Transit, describes this phenomenon in further detail. While MARTA’s new system does not exclude prepaid options, the clear marketing promotion is geared towards enticing occasional riders to have easier access to one-off postpaid rides. MARTA’s marketing push focused solely on the ability to purchase tickets in singular fashion, with little to no mention of adding stored value accounts or available discounts for multiple ride passes or fixed term daily to monthly passes. Dedicated riders will still have access to these options within the Breeze app, but the feedback received, as well as the trends of ridership, point towards growth coming from individual ticket purchasers.
Interestingly, the worlds of commercial real estate woes and easier access to the recreational use of mass transit are intersecting in Atlanta, as developers are looking to convert the former CNN Center complex in downtown Atlanta into residential units. This plan would give residents direct access to a MARTA station in the building, reversing the idea of use to commute to work and instead provide options to use the station on an as-needed basis for both residents and guests at the attached hotel in the complex.
Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Javelin Strategy and Research.
