It appears the government lockdowns in response to the COVID-19 pandemic has hastened the deflation of the commercial real estate bubble.
According to CoStar Group, an estimated $126 billion in commercial real estate will be forced to sell at distressed prices over the next two years. That will eclipse the amount of distressed commercial property sold during the first two years after the 2008 financial crisis.
In the years after the great recession, commercial real estate boomed, pumped up by easy money from the Federal Reserve. Real estate mogul Sam Zell warned about the bubble in commercial real estate back in 2016. In 2017, we reported on the apartment building boom. As with all Fed-induced bubbles, it was bound to pop, but it appears the pandemic has hastened the process.
According to CoStar, distressed hotels, retail space, office buildings, and other commercial properties will continue to flood the market for the next five years. Analysts project the market could potentially reach $321 billion in distressed sales by 2025. In the worst-case scenario, it could swell to $659 billion. Read more…..
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