![]() ![]() To better understand, let’s take a look at the commercial real estate landscape from Morgan Stanley, UBS, and Goldman Sachs from this month-all of which touch on various, but sometimes similar, aspects of what’s to be expected. “This is part of a larger set of activities that, while they made sense when interest rates were rock-bottom and liquidity was abundant, make a lot less sense today,” he told Insider.īillionaire investor Howard Marks, cofounder of Oaktree Capital Management, also expressed concern over the sector’s health, writing in a memo that “notable defaults on office building mortgages and other CRE loans are highly likely to occur.” As for banking giants, they’ve presented their outlooks for the sector, ranging from almost apocalyptic to manageable losses.īut what do big banks think about all this? Last week, Allianz’s chief economic advisor, Mohamed El-Erian, told Insider that “the moment of truth will play out” for the commercial real estate market once those loans mature and the sector is forced to adjust to the current economic climate. Those commercial real estate headwinds-which are particularly strong in the office space sector-will increase the risk of defaults, distress, and delinquencies, as the industry is largely built on debt. ![]() Even before the banks went under, experts within the sector knew it would be a challenging time for commercial real estate, particularly for office properties with rising vacancy rates and falling property values, amid the shift to remote work. Not to mention, the entire sector faces a wave of loan maturities-meaning they’ll need to refinance to higher interest rates.
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