THE slump in the world’s biggest asset class has spread from the housing market to commercial real estate, threatening to unleash waves of credit turmoil across the economy.
Almost US$175 billion of real estate credit is already distressed, according to data compiled by Bloomberg — about four times more
than the next biggest industry.
As the toll from higher interest rates and the end of easy money mounts, many real estate markets are almost frozen, with
some lenders telling borrowers to sell assets or risk foreclosure amid demands for additional capital from landlords.
Distress levels in European real estate are at the highest in a decade.
This has, in
part, been due to a decline in liquidity, according to a study by law firm Weil, Gotshal & Manges.
UK commercial property values fell more than 20 percent in the second half of 2022, MSCI Inc. data show.
In the United States, the drop was 9 percent, according to Green Street.
The fall in transactions and development
in commercial and residential real estate will inevitably impact spending in
the real economy. – Bloomberg.