Specialists believe that one of the largest falls in the commercial real estate market is coming this year 2023, which is expected to be similar to or greater than the financial crisis of 2008, therefore real estate values could fall by 40% this year.
These projections are based on the current fragility of the US economy. According to Fitch Ratings, it indicated in its report that between April and December of this year, the maturity is 35% of commercial mortgage loans of the combined securities. this amounts to $5.8 billion that can no longer be refinanced..
For Lisa Shalette, chief investment officer at Morgan Stanley Wealth Management, high interest rates are one of the first obstacles for investors to refinance trillions of dollars of looming debt. Commercial mortgage debt is estimated to be around $1.5 trillion, maturing at the end of 2025..
Chalett mentioned that “analysts at MS & Co. CRE prices are predicted to drop from peak to low by up to 40%, which is worse than during the Great Financial Crisis. More than 50% of $2.9 trillion in commercial mortgages must be renegotiated within the next 24 months.when it is likely that new interest rates will rise between 350 and 450 basis points,” he said.
Other disadvantages noted by experts are the high cost of loans, the new format of remote work and tightening credit conditions led to the largest increase in defaults in the market.
The analyst added that “the commercial real estate sector, which faces barriers to transitioning to hybrid/remote workyou have to refinance more than half of your mortgage debt over the next two years,” Shalette said.
For her part, Treasury Department Secretary Janet Yellen warned that due to the recent banking and economic crises in the country, “there will be problems with commercial real estate.” Banks will be able to handle the coming downturns as they get stronger.
Source: La Opinion
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