A Fresh Take on CRE

Deutsche Bank Outlook for Commercial Real Estate and Its Implications for Banks

Deutsche Bank just came out with their Outlook for Commercial Real Estate and its Implications for Banks. Here are some highlights:

– Commercial real estate faces significant challenges over the next 3-5 years
– CRE fundamentals (rents and vacancy rates) will continue to deteriorate, in some cases for several years
– Defaults on CRE debt will continue to climb over the next 18-24 months, reaching historically high levels
– CRE likely to face a severe refinancing issues over the next 3-5 years, even if CRE fundamentals improve
– In CMBS, refinancing challenges are likely lead initially to widespread maturity extensions and ultimately to widespread restructuring and foreclosures and liquidations, creating large losses for CMBS trusts
– In banks, CRE exposures are likely to lead to hundreds of billions of dollars in losses and many hundreds of failures
– The sooner losses are written-off, the sooner assets will begin to trade and the sooner the CRE market will begin to normalize

To read the full report, click here.