TAG Industrial Watch: July 6, 2024

When it comes to commercial real estate loans, today’s environment is very reminiscent of what took place during the onset of the Housing Crisis. In 2007, banks acknowledged that they were sitting on residential loans skyrocketing in defaults but claimed that the problems were only with subprime mortgages that accounted for 20 percent of all loan originations at the peak of the bubble in 2006 (FDIC). Of course, it quickly became evident that mortgage problems were not contained within subprime but affected the entire market. Today, a similar narrative is being sold when it comes to the troubles in CRE lending where a fifth of outstanding debt ($929 billion) comes due this year (CoStar).

So far, most of the borrowers who are struggling to repay loans and can’t afford to refinance into higher interest rates are concentrated in the office sector but this may only indicate that these properties are the weakest link in the chain. Banks alone are sitting on $3 trillion of commercial loans – twice the level than during the Great Recession (FRED) – yet the lion’s share of new loans was claimed by the multi-family and industrial markets that boomed since then. From 2010 to 2023, multifamily space across the top 50 metros expanded by 3.5 billion square feet, followed by industrial at 3.3 billion square feet, office space added 950 million square feet, and retail increased by 640 million square feet (CoStar). For industrial landlords facing maturing debt in the next couple of years, they should take into strong consideration that industrial vacancy rates just hit a 10-year high and asking rents turned south in Q2. While all the attention is on the office, industrial landlords still have the perfect opportunity to take advantage of record-high equity levels before the spotlight can turn to them.

I N D U S T R I A L   N E W S

This Is What The End of Extend And Pretend Looks Like
GlobeSt.com – June 26, 2024
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Loan Modifications Nearly Double In 12 Months
GlobeSt.com – July 1, 2024
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Property Management Success:
Extreme Weather And Industrial Resiliency

Commercial Property Executive – July 3, 2024
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Federal Reserve’s Delay In Cutting Rates Seen
Posing Risks For Commercial Property Lenders

CoStar – May 7, 2024
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Commercial Real Estate Loans:
A Ticking Time Bomb For Us Banks

International Banker – May 28, 2024
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R E G I O N A L   N E W S

Large Chicago-Area Industrial Lease Inked In Huntley  
Connect CRE – June 18, 2024
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Air Liquide Building $850M Baytown Facility
Connect CRE – June 28, 2024
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Core Industrial Realty Announces
Completion Of Multiple Transactions

Bisnow – June 14, 2024
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John Deere Eyes $125M Warehouse Near Chicago
Commercial Property Executive – July 2, 2024
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Industrial Construction In Dallas-Fort
Worth Shifts Toward Urban Core

CoStar – June 20, 2024
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