Posted on 07/24/2023 3:43:34 PM PDT by Kaiser8408a
Where is the bottom for commercial real estate (CRE)?
Starwood Capital Group’s Barry Sternlicht recently told Bloomberg’s David Rubenstein about the ongoing crisis in the commercial real estate sector, equating it to a severe “Category 5 hurricane“. He cautioned, “It’s sort of a blackout hovering over the entire industry until we get some relief or some understanding of what the Fed’s going to do over the longer term.”
Currently, the biggest problem in the CRE space is sliding office and retail demand in downtown areas. Couple that with high-interest rates, and there’s a disaster lurking for building owners. According to Morgan Stanley, the elephant in the room is a massive debt maturity wall of CRE loans that totals $500 billion in 2024 and $2.5 trillion over the next five years.
Senior markets editor for Bloomberg, Michael Regan, chatted with John Fish, who is head of the construction firm Suffolk, chair of the Real Estate Roundtable think tank and former chairman of the board of the Federal Reserve Bank of Boston, in the What Goes Up podcast to discuss the biggest problems in the CRE market.
Fish warned that “capital markets nationally have frozen” and “nobody understands value.” He said, “We can’t evaluate price discovery because very few assets have traded during this period of time. Nobody understands where the bottom is.”
Beginning Of CRE Firesale? Baltimore Office Tower Dumped At 63% Discount CRE Panic Hits Baltimore As Second Office Tower Dumped At 69% Discount
Sooooo, Powell and The Fed will likely raise rates this week. And maybe a few more times over the next few months. And The Fed remains defiant about taking away the Covid monetary stimulus.
(Excerpt) Read more at confoundedinterest.net ...
The safest places for “refugees” are farms.
For their safety, they should never be lodged in urban hotels.
Only at the very high end of income earning. People haven't been able to afford living in a viable city for 50 years, especially if they hoped to raise a family.
Commercial real estate in cities has been marked for demise for a century. Too many industries require horizontal building expansion, high ceilings, and large open areas.
Cities were built around boats and some rail lines. The automobile, the telephone, and the computer have made them a lesser option compared to large plants and corporate campuses.
The traditional "city" and its urban office landscape is being swept away by unstoppable forces and it isn't coming back. It will be a series of collapses amid a constant backdrop of death by a thousand cuts.
More great news!
About half of downtown Dallas was empty for about 20 years, some of the towers longer than that. One department store became a college campus, another was repurposed to governmental office space (despite all the vacant office space - I wouldn’t dig too deep into that deal). Most of the properties were eventually converted to residential; the original LTV tower was split between residential and a Hilton Garden Inn. Three midrises were demolished; two became parks, the other incorporated into a church campus.
Meanwhile highrise construction continues outside the downtown core.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.