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Commercial-Property Sales Predicted To Slump Beyond The Last Crisis

Property Sales
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EDITOR NOTE: Empty offices, sprawling lifeless mega-structures where malls once stood. A dystopian sci-fi landscape? It’s more likely to be the common features of our new post-COVID economy. According to this author, we might expect around $659 billion worth of distressed properties being sold. Until then, mortgage delinquencies, shuttered businesses, and further unemployment are likely to effectuate their own damages leading up to the sale, when large-scale brick and mortar businesses finally “give up the ghost.” That’s an optimistic picture, believe it or not. By 2025, we don’t know how the Fed’s inflationary policies will negatively affect the economic landscape. Sadly, neither does the Fed.

An estimated $126 billion in commercial real estate will be forced to sell at distressed prices through 2022, more than the first two years after the global financial crisis, according to CoStar Group Inc.

Distressed hotel, retail, office and other properties will continue to flow to the market over the coming five years, potentially reaching $321 billion in sales by 2025, the real estate analytics company said. The total may swell to $659 billion in a worst-case scenario, according to a CoStar presentation released last week.

Read more: Forever-Empty Offices and Malls May Mean Pain for CMBS Investors

Mortgage delinquencies have soared for hotel and retail properties during the pandemic, while office buildings face an uncertain future as employees continue working remotely. Regulators have so far avoided pressuring lenders to recognize losses, while most borrowers continue to hold out hope for a rebound, especially as Covid-19 vaccines begin distribution.

Originally posted on Yahoo! Finance

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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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