Odd Lots Lots More on the Big Can Kick in Commercial Real Estate
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Mar 22, 2024 
Rich Hill, head of real estate strategy and research at Cohen & Steers and former Morgan Stanley expert, dives deep into the resilience of the commercial real estate market. He discusses how despite increasing defaults, the anticipated doomsday scenario hasn’t materialized. Hill elaborates on the 'prisoner's dilemma' where lenders and borrowers are working together to extend loans. He also analyzes the challenges of declining office valuations and the potential for a durable recovery amidst high vacancy rates and changing investor behaviors.
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CRE Resilience and REIT Rally
- The commercial real estate market has shown surprising resilience, with defaults increasing but not disastrously.
- Listed real estate investment trusts (REITs) have rallied since late 2023, partially due to expectations of rate cuts.
CRE Market Transparency and Appraisal Valuations
- There's a gap between perceived and actual market conditions in commercial real estate due to limited transactions.
- Appraisal valuations are leading transaction volumes, driven by higher interest rates and discount rates.
Refinancing and the Prisoner's Dilemma
- Refinancing and "amend and extend" practices have provided breathing room for the commercial real estate market.
- Borrowers and lenders are cooperating to avoid pain, creating a "prisoner's dilemma" scenario.