The financial mess may soon face a harsh reality, as a commercial real estate crisis threatens profits from America’s largest banks. Several reports suggest that banks with large amounts of commercial real estate in their portfolios may see significant declines over the next few months.
Recently PWC’s real estate practice published a report titled “The 2021 Emerging Trends”, showing that the city’s rank has changed a lot since the outbreak of coronovirus. For example, for many years the city of Seattle was a top ten city for real estate investment but after Kovid-19, it fell to 34th place in terms of ratings with other US cities.
With major cities such as Seattle, Boston, New York, LA, Atlanta and many more cities being the biggest issue, rising commercial real estate (CRE) losses are on the horizon.
For example, on November 11, 2020, columnist David J. Lynch published an article about how the current CRE market should scare financial institutions such as banks. The editorial reported that Manhattan-based Signature Bank’s third-quarter earnings showed “60 percent of its portfolio tied up in commercial real estate.”
Lynch further states that some banks may use funds given to banks such as hotels, landlords and local shops, but in cities such as New York, these places can now be called “ghost cities”.
Lynch further states as Signature Bank suffers badly,
The bank’s bad-loan write-offs, though still modest, are creeping higher. Despite years of steady profits, investors have punished the stock, which has lost 27 percent of its value this year, even after a recent rebound.
Originally, commercial real estate or CRE is a type of property leveraged exclusively for commercial purposes. A very large portion of the world’s CREs are leased to those who generate income but due to the government’s response to Kovid-19 and the virus, some of the people leasing CRs cannot generate income.
The CRM crisis arising in the United States is occurring in almost every state of the country. On November 16, 2020, Jadupara published a report, covering Delaware and the Kovid-19 response had a terrible impact on commercial real estate tenants and landlords.
Jossoper contributor John Neuseller, Jr. writes, “The real estate industry in Delaware has experienced dramatic changes in the last eight months resulting from the Kovid-19 epidemic. Many commercial tenants cannot meet their monthly rent obligations”. “Facing low monthly rental income, some landlords are left with a cash crunch that affects their ability to mortgage their banks.”
Meanwhile, the federal eviction ban enacted by the CDC will be lifted at the end of the year and skeptics believe it could arouse confusion. Local officials in hard-hit CRE markets such as New York and California are trying to curb the results by adding further regulations.
For example, California will continue to limit annual property tax increases for CR markets. In addition, analysts say that no matter what happens in January, no US president will be able to influence the returns on CRE. According to a recently published report by Cushman & Wakefield, the real estate recession is guided by the recession, no matter which political party is in charge of the United States.
“Instead of elections,” the Cushman & Wakefield report emphasized, “real estate cycles, the economy, interest rates, COVID-19, geopolitical events, and long-term growth drivers (such as demographics and technological change) are areas to focus on . In determining leasing fundamentals and property values. “
Meanwhile, apart from CRE and residential real estate, investment property gold and bitcoin have seen different price changes in recent times. For example, after the announcement of the Morden vaccine on Monday, gold prices dropped by 0.40% and one ounce of gold is trading at $ 1,888 per unit. Gold also staggered in value when Pfizer announced a vaccine for Kovid-19, but the crypto-asset markets did the opposite.
For example, after the announcement of Modern Vaccine, Bitcoin (BTC) touched a high of $ 16,850, an increase of 5.6% on the exchange bitstamp. Ethereum prices rose 3.39% on Monday during the midday trading session, touching a high of $ 464. The economy of the entire crypto market is still close to $ 4 trillion to half a trillion dollars, up 2.6% on Monday.
What do you think about the emerging commercial real estate crisis in America? Let us know what you think on this topic in the comments section below.
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