The industrial real estate market is headed for a severe collapse due largely to sky-high rates of interest and declining property values, in keeping with a survey of investors.
Around two-thirds of those that responded to a Bloomberg News survey said they imagine that the industrial real estate market will get well only after a crash.
When asked after they imagine the value of office properties will hit bottom, 44% said they expect that to occur within the second half of next 12 months while 22% said it’s going to be in the primary six months of 2024, in keeping with Bloomberg News.
Just 6% of the 919 respondents said that prices would bottom out this 12 months while 29% predicted that it will occur in 2025 or beyond.
The Fed has raised rates of interest aggressively, which is increasing the associated fee of financing industrial properties at a time when there may be also reduced need for them, which has hit rent levels.
Investors are bracing for a possible crisis triggered by default on $1.5 trillion in debt that’s coming due by the tip of 2025,.
Some $270 billion in industrial real estate loans held by banks are set to mature in 2023, in keeping with Trepp.
Over the following 4 years, industrial real estate properties must repay debt maturities that may peak at $550 billion in 2027, in keeping with analysts at Morgan Stanley.
Earlier this month, a study released by economists from NYU Stern Business School, Columbia Business School and the National Bureau of Economic Research showed that emptiness rates are at 30-year highs in lots of American cities.
In Recent York City, the emptiness rate was 22.2% in Q1 of 2023.
Office buildings in Recent York City — the world’s largest industrial real estate market — have lost $76 billion in value from their most up-to-date sales prices, in keeping with broker JLL.
Blackstone and RXR sold the office constructing at 1330 Avenue of the Americas for $320 million — a 3rd lower than the listing price in 2006.
Real estate firm Cushman & Wakefield recently predicted that there could possibly be 1 billion square feet of unused office space within the US by 2030.
The Recent York Fed said earlier this 12 months that it was unclear when or if the industrial real estate sector would return to its prior strength.
“While the residential rental market has bounced back, the retail and office markets have remained slack – largely resulting from the shift to distant work and online shopping,” the bank said in a posting on its website.
Business rents in Manhattan are down lots from where they were before the pandemic, and “this weakening trend may proceed as increasingly industrial tenants roll off leases that were negotiated when demand for office and retail space was far stronger.”
With Post wires