via foxnews:
The commercial real estate market may be headed for a crash that rivals the 2008 financial crisis this year.
Office and retail property valuations could plummet as much as 40% from peak to trough this year as higher interest rates make it harder for investors to refinance trillions in looming debt, according to Lisa Shalett, chief investment officer for Morgan Stanley Wealth Management.
“MS & Co. analysts forecast a peak-to-trough CRE price decline of as much as 40%, worse than in the Great Financial Crisis,” Shalett wrote in a weekly investment note. “More than 50% of the $2.9 trillion in commercial mortgages will need to be renegotiated in the next 24 months when new lending rates are likely to be up by 350 to 450 basis points.”
via CNBC:
Concerns are mounting around the health of Europe’s commercial real estate market, with some investors questioning whether it could be the next sector to implode following last month’s banking crisis.
Higher interest rates have increased the cost of borrowing and depressed valuations in the property sector, which in recent years reigned supreme amid low bond yields.
Meanwhile, the collapse in March of U.S.-based Silicon Valley Bank and the later emergency rescue of Credit Suisse prompted fears of a so-called doom loop, in which a potential bank run could trigger a property sector downturn.
The European Central Bank earlier this month warned of “clear signs of vulnerability” in the property sector, citing “declining market liquidity and price corrections” as reasons for the uncertainty, and calling for new curbs on commercial property funds to reduce the risks of an illiquidity crisis.
A Record 30% Of San Francisco Office Space Is Vacant
A sobering report from Coldwell Banker (available to pro subs in the usual place) reveals that San Francisco’s office vacancy rate hit a record high of 29.4%, as net absorption (total new square footage leased minus the total square footage of vacated space) registered -1.56 million sq. ft.
h/t dr0id