Commercial Observer suggests possibility of commercial real estate collapse
Greg Kraut, the co-founder and CEO of New York-based KPG Funds, in Commercial Observer April 2, 202, stated ‘The commercial mortgage-backed securities (CMBS) market has essentially collapsed and the broader $20 trillion commercial real estate market is on the verge of collapse as well. We still have time to prevent this catastrophic event, but we need government intervention now.
It’s been just a few weeks since the global coronavirus pandemic started impacting our daily lives, and some landlords are already not being paid rent. Things may get materially worse with economists at the St. Louis Federal Reserve predicting that the US will lose 47 million jobs, leading to an unemployment rate of over 32%. In my estimation, up to 90% of all commercial tenants in the US will not pay their rent next month.
The domino effect of landlords not having rental revenue will potentially force property owners to default on their mortgages. This will in turn force banks to write down loans and attempt to raise capital to cover losses, in an environment where capital markets are paralyzed.’
