By KIMBERLEY HAAS
The co-founder and CEO of a platform that provides cash flow based financing to real estate entrepreneurs says there are opportunities arising for commercial property owners and managers.
Derrick Barker said in a recent interview with The Mortgage Note that he predicts there will be a deleveraging throughout the nation in 2024, explaining that there were people who bought assets in 2021 and 2022 at the top of the market with aggressive assumptions in terms of occupancy, price appreciation, and rent growth.
Many of the loans were for three years so with expectations not panning out, that is putting pressure on those commercial and rental real estate owners, Barker said.
“A lot of these people are going…
By ERIN FLYNN JAY and KIMBERLEY HAAS
As business models continue to change in the post-Covid economy, some market experts are predicting a commercial real estate crash while others are saying there could be a revival in investment opportunities.
Desmond Lachman, an American Enterprise Institute senior fellow, recently wrote that high vacancy rates have already caused commercial property prices to decline. At the same time, property owners need to roll over around $500 billion in maturing loans at higher interest rates.
Lachman said this spells trouble for the banking sector in general and the regional banks in particular. He predicted commercial real estate troubles could lead to the failure of 385 regional banks.
“With as much as 18% of their…
By DESMOND LACHMAN
Rudi Dornbusch, the late MIT economist, famously observed that economic and financial crises take longer to arrive than you can possibly imagine, but when they do come, they happen faster than you can possibly imagine.
Next year, Mr. Dornbusch’s warning could again prove to be prophetic as far as the commercial real estate sector and the regional banks are concerned. To be sure, four years on since 2020’s Covid pandemic upended the commercial property market, we have yet to have a full-blown financial crisis. However, next year could be the year when the commercial real estate market and the regional banks unravel at a faster pace than we thought possible.
At the heart of the commercial property…
By SCOTT KIMBLER
As business models in major cities have changed in the post-Covid economy, Atlanta is holding its own as companies and commercial property owners rethink the modern workplace.
Many companies in the metro Atlanta area have altered the workplace to a hybrid model, a work-from-home model, or even a don’t come in at all model, and that is beginning to affect those in the business of commercial real estate ownership.
“There have been some delinquencies in the commercial mortgage industry,” said Sergio Garate, assistant professor in the practice of finance and director of the real estate program and Emory University’s Goizeta Business School. “Especially in the Atlanta area, there have been loan delinquents to levels we haven’t seen…
By KIMBERLEY HAAS
As the commercial real estate market continues to change, office space is down, but not out, according to an economist who says a majority of companies are still committed to having a place where the “secret sauce” of their business is created.
Richard Barkham, global chief economist for CBRE in Dallas, said it may take up to nine years for the office market to fully recover but it is important to remember that not all of that sector has been badly hit by drops in value.
Barkham said that a large portion of the vacancies are in a minority of the stock, with 80% of the rise in vacancies in 10% of office buildings.
The office buildings…
Commercial and multifamily delinquencies fell in Q1 2022, according to the Mortgage Bankers Association’s (MBA) Commercial/Multifamily Delinquency Report. MBA looked at commercial/multifamily delinquency rates for five of the largest investor groups: commercial banks and thrifts, commercial mortgage-backed securities (CMBS), life insurance companies, and Fannie Mae and Freddie Mac. These groups hold more than 80% of outstanding debt in these categories. The number of banks and thrifts overdue by 90 or more days fell to 0.56% from Q4 2021. The number of life company portfolios 60 or more days late rose slightly to 0.05%, while Fannie Mae fell to 0.38%. Freddie Mac remained unchanged at 0.08%. CMBS that were 30 or more days delinquent or in REO dropped to 3.36%. “Commercial…
By CHUCK GREEN While climbing interest rates are throwing a monkey wrench in the U.S. economy, commercial real estate – at least in the short term – seems to be looking up. In a recent address to the 2022 REALTORS Legislative Meetings’ Commercial Economic Issues and Trends Forum, NAR Chief Economist Lawrence Yun said regardless of burgeoning rates, the commercial real estate market is expected to prosper. “Outside of the office sector, which is lagging behind as employers allow increased remote work flexibility to keep and attract talent, commercial real estate continues to strengthen,” Yun said. Apparently shucking aside setbacks in light of the 2020 and 2021 pandemic, heading into this year conditions were looking up for the commercial real…
Commercial real estate (CRE) price growth may keep outpacing CRE income growth, suggesting property values may not have reached their cyclical peak, according to First American’s Potential Capitalization Rate (CPR) Model for Q4 2021. First American’s PCR estimates capitalization rates using historical data for interest rates, rental income, occupancy rates, debt, and recent property price trends. In Q4 2021, the actual cap rate hit a record low of 5.2% while the potential cap rate sank to 4.4%. When the actual cap rate is significantly above the potential cap rate, as was the case in the fourth quarter of 2021, the model suggests that the CRE market can support a lower cap rate. The National potential cap rate was 4.4%, down…
By CHUCK GREEN Builders in the United States are feeling the effects of Russia’s invasion of Ukraine, leading some experts to say there will be ramifications in the home and commercial markets. “Already, retail gasoline and diesel prices have jumped by record amounts and reached record levels. Construction firms use large amounts of fuel for their own trucks and offroad equipment,” said Ken Simonson, Chief Economist of The Associated General Contractors of America. Doubling down on the notion that the conflict is putting builders in a sticky situation, Simonson said they pay directly through fuel surcharges. Costs are embedded in the thousands of deliveries of equipment and materials to job sites as well as the hauling away of dirt, debris,…
Delinquencies on commercial and multifamily mortgages fell in Q4 2021, according to the Mortgage Bankers Association’s (MBA) Commercial/Multifamily Delinquency Report. Outstanding loan balances that were current on their payments rose from 96.7% to 97%, with only 1.9% 90 or more days delinquent or in REO, down from 2.2%. Loans 60-90 and 30-60 days delinquent saw no change, at 0.2% and 0.3% respectively. Loans that were less than 30 days delinquent fell 0.1% to 0.7%. Lodging and retail properties continued to be the most delinquent but saw improvement in Q4. For lodging loans, delinquencies fell 3.5% to 10.5%, while delinquent retail loans fell from 8.2% to 7.6%. CMBS loans also saw improvement, with 5.7% of balances non-current, down from 7.2% in…
