– 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
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