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☆ Investors would be wise to heed these lessons from the 'retail apocalypse' as office values reset
▼ + stars: | 2023-05-14 | by ( Christina Cheddar Berk | ) www.cnbc.com time to read: +7 min

Still, it is also true that a lot of disruption occurred in between the events that prompted the "apocalypse" chatter and the firmer ground where retail real estate stands today. Recalling how these events played out is helpful in understanding the situation facing U.S. office properties. For office buildings, the pandemic knocked things out of whack. The same idea is being discussed for office buildings, but one-size will not fit all. There may be no surprise that there has been a huge drop-off in the number of loans with office properties as collateral since March.

☆ No office tower is safe from the roiling market — not even a trophy building housing Google and Visa deemed one of the best
▼ + stars: | 2023-05-10 | by ( Daniel Geiger | ) www.businessinsider.com time to read: +9 min

Potential problems at One Market Plaza show how far San Francisco's office market may fall. One Market Plaza has long been considered the pinnacle of San Francisco's office market. Autodesk plans to downsize by about 73,000 square feet to 211,000 square feet, a spokeswoman told Insider. Google did not respond to a request for comment on its plans for One Market Plaza. One Market Plaza could indicate how far San Francisco's office woes reachTurbulence at One Market Plaza indicates the extent of the problems facing San Francisco's office market.

☆ Go check out this map that shows just how many vacant office buildings are in downtown San Francisco
▼ + stars: | 2023-05-08 | by ( Britney Nguyen | ) www.businessinsider.com time to read: +2 min

Over 18 million square feet of San Francisco's office space is vacant, the SF Chronicle reported. Thirty-one percent of San Francisco's downtown offices is reportedly open for lease or sublease. The Chronicle's interactive map of the vacancies in downtown San Francisco's office buildings is worth checking out. The rising amount of vacant office real estate partly reflects remote work's impact on office attendance. A telling sign for San Francisco's office building market could come from a 22-story office tower on 350 California Street that is reportedly expected to go for $60 million, after it was valued at $300 million in 2019.

☆ Giant loans on 10 major US office towers are due soon, stoking fears of more defaults that could be the next crisis to hit banks — and the economy
▼ + stars: | 2023-05-05 | by ( Alex Nicoll | ) www.businessinsider.com time to read: +3 min

About $80 billion in office loans come due this year, threatening defaults. High-profile owners like Blackstone and Brookfield have walked away from major office loans as high interest rates and tighter lending levels have made refinancing debts more costly. Some analysts have even said that commercial real estate debt is the next big danger for the stock market. The leading research firm analyzing commercial real estate debt, Trepp, has a front-row seat to the reckoning. Office landlords' leasing, and therefore revenue, has fallen significantly due to the rise of remote work.

☆ Banks are finally admitting they have a problem with billions of dollars in looming real-estate defaults
▼ + stars: | 2023-05-01 | by ( Daniel Geiger | ) www.businessinsider.com time to read: +7 min

This earnings season, some major banks bucked tumult in the sector by raking in record revenues and surpassing Wall Street expectations. The bank separately disclosed $725 million of "non-accrual loans" tied to office assets — debts that are already delinquent on payments. That was a nearly fourfold increase in dollar volume of bad office loans over the previous quarter held by the bank. Even some loans tied the nation's robust market for apartment buildings have faltered recently. Anderson said about $760 billion of office loans were held by banks, which amounts to roughly 35% of their commercial-real-estate debt.

☆ A San Francisco office building was worth $300 million before the pandemic. Now, it could sell for only $60 million — a perfect example of why downtowns are in trouble
▼ + stars: | 2023-04-28 | by ( Britney Nguyen | ) www.businessinsider.com time to read: +3 min

A 22-story office tower in San Francisco that was worth $300 million in 2019 is for sale. The office tower, which sits at 350 California Street, was previously worth around $300 million during its last sale, office brokers told The Journal. The building's expected decline in value reflects the current crisis facing the real-estate industry across the US, and remote work's heavy impact on San Francisco's office buildings, in particular. Over a quarter of San Francisco's office space is empty as well, according to CBRE. Last summer, for example, Salesforce had half of its Salesforce Tower office space listed for lease as a sublet.

☆ Big apartment landlords lean in to AI and proptechs as profit squeezes loom
▼ + stars: | 2023-04-28 | by ( Alex Nicoll | ) www.businessinsider.com time to read: +7 min

Apartment landlords are getting squeezed by rising interest rates and insurance costs . interest rates and insurance . But some big US landlords were already waist-deep in labor-saving technologies of their own to ward off profit squeezes, like the ones many are facing today. On the supply side, the race has been on for some time to sell landlords on tech that works. In this case, landlords are adapting to today's higher interest rates from a time when borrowing costs were low and taking any pressure off operations, he said.

☆ Banks aren't the only ones that hold risky commercial-real-estate debt. Pension funds are about to feel the pain, too.
▼ + stars: | 2023-04-24 | by ( Al Yoon | ) www.businessinsider.com time to read: +4 min

Pension funds, REITs, and insurers hold more than $1.2 trillion in commercial-real-estate debt. CalSTRS, a California pension fund, told the FT it will be writing down its real-estate portfolio. Among them are the large pension funds, REITs, and insurance companies, together accounting for more than $1.2 trillion — or 22% — of the $5.62 trillion in total commercial-real-estate debt outstanding, according to BofA Global Research. Some pension funds were already planning to reduce their exposures to commercial real estate even before the recent bank failures magnified the risks. In September, fund managers at Artemis Real Estate Partners and PGIM Real Estate said at a Bisnow conference that their investors indicated they'd be reducing allocations to real estate, just because the assets had been outperforming others.

☆ Wall Street warns the banking turmoil is coming for the commercial real estate sector
▼ + stars: | 2023-04-20 | by ( Phil Rosen | ) www.businessinsider.com time to read: +4 min

JPMorgan Asset Management's Jonathan Liang said Wednesday on Bloomberg that smaller banks now face an increased risk of credit losses because of their heightened exposure to the commercial real estate debt. And Goldman Sachs' global head of real estate client solutions, Jeffery Fine, recently said the commercial real estate market is in the middle of a "perfect storm" of higher rates, tight credit, and fast-maturing debt. The Goldman strategist said securing commercial real estate loans now is "almost impossible" since financing has just about shut down. What's your outlook for the commercial real estate sector in the next 6 months? This real estate investor commands a 311-unit portfolio.

☆ Banking turmoil isn't over as regional lenders face risk of commercial-property credit losses, JPMorgan strategist says
▼ + stars: | 2023-04-19 | by ( Zinya Salfiti | ) www.businessinsider.com time to read: +2 min

Regional banks' troubles aren't over and remain "an area of concern", JPMorgan Asset Management's Jonathan Liang said. They are facing increased risks of credit losses in the commercial-property sector, which may come under stress, he said. And so we think that in the coming year or two, there's going to be growing distress in this space, and that will also potentially amount to credit losses for those US regional banks," he added. Many experts have warned the US commercial real-estate sector could face problems as high borrowing costs and tighter credit conditions following the recent banking turmoil complicate matters for big property owners as they seek to refinance loans. Nearly $450 billion in commercial real-estate debt is due to mature in 2023 - meaning a final payment on those loans are due, per data cited from Trepp by JPMorgan.

☆ Landlords pumped billions into apartment buildings during the pandemic. That bet could now go horribly wrong.
▼ + stars: | 2023-04-16 | by ( Daniel Geiger | ) www.businessinsider.com time to read: +4 min

Big money investors pumped billions into buying up apartment buildings in the pandemic era. But fault lines have emerged for investors who paid top dollar for assets that depended on substantial rent increases and persistent low interest rates to achieve profitability. In those years, investors purchased $355.5 billion and $299.2 billion worth of apartment buildings, according to MSCI — unprecedented sums that far surpassed the previous $194 billion record of multifamily sales in 2019. "It's early, but it's going to become a bigger story, especially if interest rates stay high and lending standards are tight," said Alan Todd, the head of commercial-mortgage-backed-securities strategy at BofA Global Research. As these short-term debts come due, they will be difficult to swap with commensurately sized loans today, because of the falling values, higher interest rates, and lender caution.

"Weakness continues to develop in commercial real estate office," Wells Fargo Chief Executive Charlie Scharf said on a call with analysts. Stress in the commercial real estate sector could have broad implications for banks and the economy, as losses emanating there can tighten credit availability and exacerbate a downturn. More than $1.4 trillion in U.S. CRE loans will mature by 2027, with some $270 billion coming due this year, according to real estate data provider Trepp. As the epicenter for the technology industry downturn, California's CRE market has been hit hard. Citigroup and Wells Fargo declined to comment for this article.

☆ The fallout from empty offices is coming. Here's where investors could see the pain
▼ + stars: | 2023-04-14 | by ( Christina Cheddar Berk | ) www.cnbc.com time to read: +12 min

As concerns about regional banks roiled markets, investors weighed another threat: commercial real estate. Also, layered on top of the property value pressure, are the tightening credit conditions brought on by the recent turmoil in the banking sector. There is no doubt this scenario is a toxic mix for the capital-intensive real estate industry. At the moment, many experts say the real estate market isn't causing trouble for banks, but fears about the financial system are likely worsening conditions in real estate because liquidity is being reduced. The biggest concern is seeing how many other companies join Brookfield , Blackstone and Pimco in handing back the keys on office properties, Clancy said.

☆ Landlords who bought thousands of apartments are facing a reckoning
▼ + stars: | 2023-04-11 | by ( Daniel Geiger | ) www.businessinsider.com time to read: +9 min

Investors showed outsize interest in apartment buildings during the pandemic. Rents and occupancy rates were rising, interest rates remained relatively low, and rental-property prices were climbing with no sign of letting up during a surge in housing demand. Laguna Point did not respond to a request for comment. Marc McDevitt, a senior managing director at Cred iQ, said it was possible Laguna Point had lost some, or even all, of its investment in the deal. While offices have been going through a paradigmatic shift as more workers do their jobs remotely, apartment buildings have experienced robust demand from tenants.

☆ American offices are half-empty. That could be the next big risk for banks
▼ + stars: | 2023-04-10 | by ( Julia Horowitz | ) edition.cnn.com time to read: +9 min

“I’m more concerned than I’ve been in a long time,” said Matt Anderson, managing director at Trepp, which provides data on commercial real estate. About $270 billion in commercial real estate loans held by banks will come due in 2023, according to Trepp. Questions about the health of banks with sizable exposures to commercial real estate loans cause customers to pull deposits. That forces lenders to demand repayment — exacerbating the sector’s downturn and further damaging the banks’ financial position. The likeliest outcome is thought to be an uptick in defaults and reduced access to funding for the commercial real estate industry.

☆ Three major risks that have the banking industry on edge
▼ + stars: | 2023-04-10 | by ( Allison Morrow | ) edition.cnn.com time to read: +6 min

The toll of the WFH eraCommercial real estate — offices, apartment complexes, warehouses and malls — has come under substantial pressure, my colleague Julia Horowitz reports. Commercial property valuations could fall by roughly 20% to 25% this year, according to Rich Hill, head of real estate strategy at Cohen & Steers. About $270 billion in commercial real estate loans held by banks will come due in 2023. The proportion of commercial office mortgages where borrowers are behind with payments is rising, according to Trepp, which provides data on commercial real estate, and high-profile defaults are making headlines. That might seem simplistic, but it’s especially relevant for an industry as uniquely reliant on trust as banking is.

☆ Premarket stocks: What markets are watching after digesting the US jobs data
▼ + stars: | 2023-04-10 | by ( Nicole Goodkind | ) edition.cnn.com time to read: +9 min

While inflation has come down and other economic data point to a cooling economy, the labor market has remained remarkably resilient. The labor market is cooling but not rapidly or significantly, and further rate hikes can’t be ruled out. More trouble for commercial real estateA few weeks ago, Before the Bell wrote about big problems brewing in the $20 trillion commercial real estate industry. In a worst-case scenario, anxiety about bank lending to commercial real estate could spiral, prompting customers to yank their deposits. The proportion of commercial office mortgages where borrowers are behind with payments is rising, according to Trepp, which provides data on commercial real estate.

☆ Commercial real estate loan defaults will rise in a credit crunch but a crisis like 2008 is unlikely, says UBS
▼ + stars: | 2023-04-05 | by ( Carla Mozée | ) www.businessinsider.com time to read: +4 min

Defaults on commercial real estate loans will likely rise from a potential credit crunch, says UBS Global Wealth Management. Data from Trepp shows the delinquency rate for loans in the office market climbed in March. After the failures of Silicon Valley Bank and Signature Bank last month, investors searching for signs of further stress in the banking system are seeing problems brewing in the commercial real estate market. Roughly $5.4 trillion in CRE debt is outstanding, with $1.2 trillion set to mature this year and in 2024, said UBS, noting the figures exclude multifamily commercial real estate. The office segment among commercial real estatement sectors only represents about 15% of the total value of commercial real estate, she said.

☆ Real estate warning: beware the backward cap
▼ + stars: | 2023-04-05 | by ( Lauren Silva Laughlin | ) www.reuters.com time to read: +6 min

The commercial real estate industry has a different kind of backward cap – one that’s also a sign of a losing streak. The cap rate comes from dividing a property’s net operating income in any given year – money from rent minus associated costs – by the asset’s value. For more than 10 years, that gap remained positive even though cap rates were falling in virtually all real estate subsectors, from shopping malls to apartments. Reuters GraphicsAsk a large-scale real estate owner – or several – about this and they are characteristically optimistic. Reuters GraphicsWhen Lehman Brothers went bankrupt, the narrowed spread between cap rates and interest costs didn’t last for long.

☆ Big real estate landlords are finally starting to decarbonize, creating an $18 trillion market that this Blackstone portfolio company plans to profit from at every turn
▼ + stars: | 2023-04-03 | by ( Alex Nicoll | ) www.businessinsider.com time to read: +7 min

The Blackstone portfolio company Legence wants to be a one-stop shop for landlords. A Real Estate Board of New York study found that the total penalties could top $213 million. Its ICS became the strategic planner, its CMTA, which designed the first net-zero school in the United States, designed the upgrades, and its Gilbert Mechanical installed the new heating, cooling, ventilation, and lighting hardware. How to do itIt may still be a challenge to coordinate decarbonization processes, which don't come naturally to large-scale real-estate operators, Boland said. Legence plans to grow the business's geographic scope and increase its depth in current markets, including Colorado and California, Sprau said.

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☆ Commercial real estate is struggling with rising rates and bank woes, but the cohead of a $21 billion lender said it's the best time in his more than 20 year career
▼ + stars: | 2023-04-03 | by ( Alex Nicoll | ) www.businessinsider.com time to read: +3 min

High interest rates, office woes, and less bank funding are chilling commercial real estate. But a top commercial real estate lender said there's never been a better time for firms like his. It's a bleak time in commercial real estate, and it can be hard to find any rays of sunshine. One Bank of America analyst just warned commercial real estate presents a major risk regional banks that own a disproportionate 68% of the sector's loans. While interest rate uncertainty is clouding the commercial real estate outlook, some transactions could provide clarity to the market, de Haan said.

☆ Office Doom Loop: Landlords Face a Reckoning As Companies Move to Fancy Offices
▼ + stars: | 2023-03-30 | by ( Daniel Geiger | ) www.businessinsider.com time to read: +14 min

The Gas Company Tower in downtown Los Angeles has a sterling pedigree, but even that can't save it from the doom loop facing many older office towers. A huge swath of America's office market is vulnerable to these twin threats of being under-equipped with amenities and underwater financially. This behavioral shift has deeply cut into demand for office space. The amount of sublease space nationally more than doubled from 118.5 million square feet at the end of 2019 to 242.8 million square feet at the end of 2022, Colliers stated. Lenders are often reluctant, he said, to seize office buildings because of the costs and expertise required to operate the properties.

☆ Commercial real estate loans are the next major risk for banks, a top analyst said. Here are the top 20 institutions exposed to property debt.
▼ + stars: | 2023-03-30 | by ( Alex Nicoll | Daniel Geiger | ) www.businessinsider.com time to read: +2 min

Silicon Valley Bank's historic collapse this month helped trigger the failures of a few other financial institutions and weeks of chaos in the world of finance. On Friday, a Bank of America analyst pinpointed commercial-real-estate loans as the next major risk for banks. Regional banks like Silicon Valley Bank hold 68% of all commercial-real-estate loans, many tied to struggling sectors, like office buildings. Even more worrisome, a massive $450 billion in commercial-real-estate loans is maturing this year, and most of that is held by banks. Silicon Valley Bank wasn't a major lender to the sector, but the failed Signature Bank, the 10th-largest lender on this list, was.

☆ Commercial real estate is the next shoe to drop for regional banks and the stock market
▼ + stars: | 2023-03-25 | by ( Matthew Fox | ) www.businessinsider.com time to read: +5 min

Commercial real estate is probably the next pain point for regional banks and the stock market, according to BofA. The bank noted that US regional banks account for 68% of all commercial real estate loans. The weakness in commercial real estate is evidenced in current market prices for stocks and debt tied to the sector. This is a perfect storm for regional banks because they have so much exposure to commercial real estate loans. According to Bank of America, US regional banks account for 68% of commercial real estate loans, much more than their mega-cap banking peers.

☆ Commercial Property Debt Creates More Bank Worries
▼ + stars: | 2023-03-21 | by ( Konrad Putzier | Peter Grant | ) www.wsj.com time to read: 1 min

A record amount of commercial mortgages expiring in 2023 is set to test the financial health of small and regional banks already under pressure following the recent failures of Silicon Valley Bank and Signature Bank. Smaller banks hold around $2.3 trillion in commercial real estate debt, including rental-apartment mortgages, according to an analysis from data firm Trepp Inc. That is almost 80% of commercial mortgages held by all banks.

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