Posted on 04/25/2024 9:26:47 AM PDT by Vendome
I said over and over again, Bidenomics will be a drag.
The latest report from real estate data provider ATTOM shows CRE foreclosures topped 625 in March, up 6% from February and 117% from the same period last year.
Last month, Federal Reserve Chair Jerome Powell testified on Capitol Hill, “We have identified the banks that have high commercial real estate concentrations, particularly office and retail and other ones that have been affected a lot,” adding, “This is a problem that we’ll be working on for years more, I’m sure. There will be bank failures, but not the big banks.”
Morgan Stanley warned earlier this year that office prices could plunge 30% due to sliding demand.
With sliding demand comes a massive amount of supply. Morgan Stanley pointed out that most of the oversupply is in offices and apartments.
For those wondering why the excess supply of office towers can’t be converted into affordable housing, Goldman also noted that prices must drop 50% for housing conversions to make sense.
(Excerpt) Read more at confoundedinterest.net ...
Good luck renting out urban high rise apartments at high market rates when one step out the door means high crime, homeless on the streets, needles and excrement.
Imagine if we had all the money we have sent to Ukraine. Use that as a federal program to make conversions viable now rather than after a 50% drop. But no, we had to help Zelensky instead of Americans.
Just think of all the tax revenue the cities are losing, San Francisco should be in all out crisis mode. Expect police and fire services to be cut back while illegal immigrates continue to receive benefits.
There were a lot of downtown conversions in Dallas a decade or two after the Ag/Oil/S&L crisis there cleared out a bunch of the downtown office towers. First National Bank, Republic Bank, Mercantile Bank (old one, not the new one that Comerica moved into) the old LTV tower, Tower Petroleum, Magnolia Oil, Fidelity Union insurance that had been empty even longer. A couple of old department stores.
I live near one of the cities with very high vacancy rates.
The traffic in the city is off 25% since covid.
Yet there are cranes still building more and more.
I asked an informed friend.
He told me that these deals are done years in advance.
So they are knowingly increasing supply in an already saturated market.
The results are the B stuff is half full, the C stuff is mostly empty while the A stuff is full of the formerly B and C businesses.
This is an example of a former office building in Manchester, NH that was recently converted to apartments.
This building was built in the 90s
It is now owned by Brady Sullivan who is a large apartment rental company. Their headquarters is one of the taller white buildings in the back of the picture.
They own several old mill buildings in NH and MA that they have converted into apartments.
https://www.zillow.com/apartments/manchester-nh/the-residence-at-1000-elm/96T6r2/
Once prices drop further I could see converting commercial to a combination of retail and residential…. Say every 5 floors would be a retail floor with restaurants and retail stores the 5 floors of residential and another floor of retail/food, and so on…. I could easily see people never leaving their building at all…. Reminds me of something almost out of Bladerunner
Or the fifth element
btt
One of the reasons they want folks back in the office.
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