Commercial real estate’s looming distress problem

About $126B worth of commercial properties could sell at distressed prices

National /
Dec.December 15, 2020 08:56 AM
Sales of distressed properties could reach $321B in the next five years. (iStock)

Sales of distressed properties could reach $321B in the next five years. (iStock)

Covid-19’s effect on commercial real estate will continue long after 2020 comes to a close.

About $126 billion worth of properties within the sector — hotels, offices and retail spaces, to name a few — will sell at distressed prices by 2022, Bloomberg News reported, citing data from CoStar Group. That’s higher than what came onto the market in the two years following the Great Recession in 2008.

Sales of these troubled assets could hit as much as $321 billion by 2025 — and in a worst case situation, the total could reach $659 billion, according to a CoStar.

Mortgage delinquencies for hotels and retail assets are skyrocketing due to the pandemic. On the office side of things, it remains unclear when, or even if, companies will will bring employees back once it’s safe to do so, but some are predicting hefty losses.

Private equity and hedge funds have raised billions of dollars to pour into these distressed real estate assets.

[Bloomberg]  — Keith Larsen


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