Commercial real estate could be where the next economic shock comes from. Here's what Elon Musk, Bill Ackman, and 5 others have predicted.
"This is the real problem," Musk
."Many cities have high office vacancy rates. Mortgage portfolios are at risk too if housing prices drop significantly.""A lot of the construction lending and real-estate lending and small business lending is done by these smaller banks. Commercial real estate is a major part of our economy. If these banks lose all their capital and deposits, that will cause a meaningful slowdown,""Commercial real estate was really an attractive asset on the way up," Chanos said.
"There are so many moving parts now that are below that surface that will impact valuations that you might not be aware of," he added. "Commercial real estate [is] widely seen as next shoe to drop as lending standards for CRE loans to tighten further," Bank of America's Michael Hartnett"We expect about 21% of commercial mortgage-backed securities outstanding office loans to default eventually, with a loss severity assumption of 41% and forward cumulative losses of 8.
"We haven't seen smooth repricing or terribly transparent repricing of the mortgages and commercial-real-estate lending that is held in nonbank financial intermediaries," Posen said.
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