Goldman Sachs Exchanges
Commercial real estate risks
Oct 17, 2023
Scott Rechler, Chairman and CEO of RXR, and Stijn Van Nieuwerburgh, Professor at Columbia Business School, discuss the risks in US commercial real estate including the impact of rising interest rates and a pullback in lending. Topics include office occupancy rates, converting office space, risks for investors and banks.
24:00
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Quick takeaways
- Commercial real estate market is facing challenges due to a regime change from low to more normalized interest rates, resulting in stress on real estate valuations and capital structures.
- The commercial real estate crisis is expected to lead to significant pain for real estate investors, both in terms of equity and debt holders, with the potential risk of another banking crisis for regional banks holding commercial real estate debt.
Deep dives
Challenges facing the commercial real estate market
The commercial real estate market is facing challenges due to a regime change from low to more normalized interest rates. As loans come due, there is stress on real estate valuations and capital structures. Structural and cyclical issues, such as the shift to remote work and oversupply in the multifamily space, are further impacting specific sectors.
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