Although I'm not all that interested in Elon Musk's thinking on CRE, he can afford to hire some pretty sharp advisors in just about any area of interest that strikes his fancy.
From Salt Lake City's Deseret News, April 4:
Elon Musk says commercial real estate debt ‘by far the most serious looming issue’
There’s a growing chorus of investors and economists — along with Elon Musk — who are warning of a looming crisis in the commercial real estate market.
Analysts with Morgan Stanley recently joined the chorus sounding alarms for the commercial real estate sector, which began facing challenges more than two years ago when the COVID-19 pandemic spurred a sudden shift to remote work and turned downtown offices into ghost towns.
Now, the sector could be the next in trouble amid banking turmoil, which led to the collapse of Silicon Valley Bank and Signature Bank last month.
Commercial real estate crisis?
“Commercial real estate, already facing headwinds from a shift to hybrid/remote work, has to refinance more than half of its mortgage debt in the next two years,” Lisa Shalett, chief investment officer for Morgan Stanley Wealth Management, wrote in a weekly Global Investment Committee note issued Monday.Shalett wrote Morgan Stanley strategists are noting the commercial real estate sector faces a “huge hurdle: 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.”
Shalett also noted commercial real estate has “primacy on the balance sheets of the regional banks, which in the past cycle accounted for 70% to 80% of all new loan originations.”
Commercial real estate prices, Shalett noted, have “already turned down and office vacancy rates have moved toward a 20-year high.”
Morgan Stanley analysts are forecasting a peak-to-trough commercial real estate price decline “of as much as 40%, worse than in the Great Financial Crisis,” she wrote.
“Distress of this type has historically not only hurt the landlords and the bankers who lend to them, but also the interconnected business communities, private capital funders and owners of any underlying securitized debt,” Shalett continued. “The tech and consumer discretionary sectors will not be immune.”
Morgan Stanley analysts “fear stresses in other asset classes” like commercial real estate “will become another headwind for megacap stocks alongside those posed by a profits recession and/or economic recession.”
Venture capital and private equity could also face hurdles, Shalett wrote....
....MUCH MORE
