Commercial Real Estate Unimpressive in 2023
Posted on 06/26/2023
It is now common knowledge that work has shifted away from the office in the last few years, with the trend picking up steam since 2020. Brick and mortar stores have also closed or moved out of urban core areas, creating quiet downtowns that generate less tax revenue. San Francisco, Seattle, and Portland have been particularly hard hit. The commercial real estate market is also suffering as a result.
Indicators like the CBRE Lending Momentum Index are falling, with the CBRE dropping 54% in Q1 2023 as commercial lending took a nosedive. Real estate debt funds in North America have raised US$ 930 million so far in Q2, which is down substantially from the US$ 10 billion raised in Q2 2022.
Almost US$ 64 billion in commercial real estate is listed as distressed and owners are sending “jingle mail” back to lenders, or leaving the keys and walking away from the loans. This trend also appeared following the 2008 housing crash. All hope is not lost, though, as reports are coming in that office space is now being converted to industrial space in some cases, a trend that could help mitigate the losses if it were to intensify.