Commercial Real Estate Is in Serious Trouble
While the financial press is attempting to cover Trump’s frenetic bipolar tariff policy, the ponderous commercial real estate market continues to deteriorate. Bisnow.com reports, citing CoStar, “US banks reported delinquencies hit 1.57 percent at the end of last year, a rate not seen since the fourth quarter of 2014.”
Putting a number to the percentage, “The 1.57 percent delinquency percentage means more than $47.1B of loans would have been delinquent at the end of the year,” writes Billy Wadsack for Bisnow’s Dallas-Fort Worth bureau. That’s an 88 percent increase from a decade ago.
Delinquencies in CMBS (Commercial Mortgage-Backed Securities) are setting multi-year highs with $38B in arrears at year-end 2024, a 41 percent increase from the previous year end.
In the face of troubling news, those who work in real estate are taking a rosy view, as usual. James Robertson, Jr. writes in the latest Grant’s Interest Rate Observer, “Optimism in the industry is the highest it has been in eight years.” This industry he calls “illiquid and slow-moving” with cycles that can “drag on for years.”
There has been little transaction volume and sellers have held tightly to the valuations and cap rates experienced during days of ZIRP. Likewise, bankers have extended and pretended, hoping the never-before-seen low rates will miraculously return t
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