Commercial Real Estate Is In Serious Trouble | Nick Halaris
Forward Guidance
The Art of Investing and Economics
Nick Hilar writes a newsletter called profit plus. It's about more than real estate, he says. He is launching a podcast soon to company the Nick Hilar show and we started recording episodes just recently.
Nick Halaris, President of real estate investment firm Metros Capital, joins Jack to share insight on the challenges commercial real estate faces after a surge in interest rates and the fall of two U.S. banks.
The phrase “commercial real estate” is a catch-all terms that refers to offices, apartment buildings (“multi-family”), retail, and industrial spaces. Unlike residential real estate, which is typically financed with long-term fixed-rate mortgages, a lot of commercial real estate was financed with floating rate debt, which means that as interest rates rose last year, the interest expense of some commercial real estate developers rose dramatically. Halaris argues that the turmoil in the banking system will likely induce banks to tighten their lending, which would inflict further hardship onto commercial real estate, much of which is financed via smaller regional banks.
Filmed on Tuesday, March 28, 2023.
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Nick Halaris website: https://nickhalaris.com/
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Nick Halaris on Twitter: https://twitter.com/NickHalaris
Nick Halaris on LinkedIn: https://www.linkedin.com/in/nick-halaris-4a25b93/
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Timestamps:
(00:00) Intro
(00:25) What Is Commercial Real Estate?
(03:20) Interest Rates Have A Huge Impact on Real Estate Valuations
(11:48) "Commercial Real Estate Is In Serious Trouble"
(16:58) Delinquency Rates Are Rising...
(19:13) Real Estate Is No Longer An Inflation Hedge
(22:45) Permissionless Ad
(23:48) Real Estate "Cap Rates" And Why They Are So Often Misunderstood
(26:53) "Accounting Games" In Real Estate
(35:02) How Bank Turmoil Will Impact Real Estate
(38:42) The End Game For Real Estate
(44:30) "it's Really Hard To Get A Loan"
(46:37) Prices Will Go Down More
(48:36) Blockworks Research Ad
(49:36) Silver Lining: Rates Could Go Down
(53:33) Retail Real Estate (Shopping Malls, etc.)
(54:39) The Housing Market Will Probably Remain Strong
(59:29) Private Equity's Investment Into Housing
(01:01:51) Nick Halaris' Newsletter, Profit Plus
(01:04:25) Closing Thoughts On Rising Interest Rates
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Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.
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