The industrial real-estate sector is headed for a “real mess” however not essentially a monetary catastrophe, a number one economist mentioned Monday.
“I expect a major correction in commercial real estate is already under way,” mentioned Adam Posen, president of the Peterson Institute for International Economics.
The trigger just isn’t difficult. Office occupancy is “lastingly” down 30%-40% because the pandemic, he mentioned.
Even thought the issue is comparatively easy, the entire trade nonetheless looks like it’s frozen in place.
“We haven’t seen smooth repricing or terribly transparent repricing of the mortgages and commercial real estate lending that is held in nonbank financial intermediaries,” Posen mentioned.
A disproportionately massive share of the lending in industrial actual property went by way of so-called “shadow banks.”
This could also be much less unhealthy for the whole economic system as a result of these non-public fairness lenders aren’t banks.
But on the identical time every little thing is opaque. The sector isn’t regulated.
City municipal tax revenues could also be hit arduous as a result of they’re primarily based on rental charges.
“Is it a financial disaster? I hope not. I don’t expect so,” he mentioned. But it may have a detrimental impact on wealth and metropolis budgets to the true economic system, Posen mentioned.
Source web site: www.marketwatch.com
