Commercial Real-Estate
The sudden surge in interest rates caused property values to fall, while the rise of remote work and e-commerce are reducing demand for office and retail space.
Investors and economists say these two forces haven’t come together on this scale since the 1970s, when a recession followed surging oil prices and a stock-market rout while new technologies enabled jobs to move out of major cities.
Commercial mortgages account for around 38% of the median U.S. bank’s loan holdings
Office-building prices are down 25% since early 2022, estimates real-estate analytics firm Green Street. Prices of malls are down 19% since early 2022 and down 44% since 2016.
WSJ 24 April 2023
https://www.wsj.com/articles/commercial-real-estate-woes-run-deeper-than-in-past-downturns-e0c1f2b3
US banks increasingly worried about falling commercial property valuations
Not all properties had been hit equally, he added: “Class A is holding up. Rents may be declining but they are not in trouble. Class B and C absolutely are.”
“The question we all have is whether contagion will spread from the office sector,” said Bryan McDonnell, head of PGIM’s real estate debt business, which has $122bn under management.
“If you get to a confidence issue then, all of a sudden, people might put all commercial real estate in the same bucket.”
FT APRIL 22 2023
https://www.ft.com/content/705df695-c81c-4ddf-8d56-a0a6e9cd7500
350 California Street was worth $300 million four years ago.
It might sell for 80% less now, brokers say,
WSJ 27 April 2023
https://www.wsj.com/articles/san-francisco-commercial-real-estate-office-buildings-471742ea
Banking’s Next Threat? It Might Be Commercial Real Estate
Robert Burgess Bloomberg 13 mars 2023
https://englundmacro.blogspot.com/2023/03/bankings-next-threat-it-might-be.html
A $1.5 Trillion Wall of Debt is Looming for US Commercial Properties
Neil Callanan Bloomberg 8 april 2023
https://englundmacro.blogspot.com/2023/04/a-15-trillion-wall-of-debt-is-looming.html
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