2024/05/28

It is market entry time – soon.

Oversimplifying, the result of central banks’ higher interest rate policies is weaker consumer demand translating into weaker corporate demand and supply, and higher unemployment. Combined, these factors result in slower and difficult overall economic conditions.

The other part is the significant devaluation in real asset values. Witness the media stories of large office complexes sold for a tenth of prior purchase values, or simply sold for a dollar, or just the keys metaphorically tossed through the lender’s door. A latest news report offers a good example, Burnett Plaza in Fort Worth Texas. At foreclosure auction the property sold for $12.3 million USD just three years after being purchased for $137.5 million USD. That is a haircut.

Various financial news media estimate that $2.0 -2.5 trillion dollars of North American commercial real estate debt comes due for renewal in the next 2 years. Other OECD countries will have similar issues. A considerable amount of that debt will default as the underlying assets are unable to support the loan-to-value (“LTV”) ratios at present interest rates and past lease rates. Those defaults will pressure banks, especially regional USA ones, and commercial mortgage lenders into liquidating under or nonperforming commercial real estate assets. Projects will fail mid-development.

These interest rate dynamics and turmoil are affecting all sectors of commercial real estate, including industrial and storage assets. The one exception less affected appears to be community grocery-anchored shopping centers. As you know, for an experienced commercial real estate operator therein lies the opportunity. It is market entry time with an eye to buy mid to late 2024. It is time to start early diligent searches for stressed or distressed commercial real estate assets throughout North America, Australia, and OECD/Europe.

Let us help you find your value-priced commercial real estate investment.

Contact us to discuss options.