You are correct, my bad! Updated my post.
It’s definitely not a good sign for commercial office space, that’s for sure.
US 30 year bonds are yielding 5%, that’s much more attractive than a half-leased Class B office tower with an 8% mortgage right now.
[0] https://bradvisors.com/wp-content/uploads/2019/04/33-41WestS...
P.S. Sorry about the nitpicking :)
https://archive.ph/ku9Xr | https://www.bloomberg.com/news/articles/2023-04-08/a-1-5-tri...
The refinancing of $1.5T in CRE before 2025 is going to be a bloodbath for regional banks, hopefully we don’t have multiple SVB situations as a result.
For anyone unfamiliar with CRE financing, a typical loan might have a term of 5-10 years and an amortization schedule of 20-30 years. A lot of loans that were taken out when the prime rate was 0-2% are now going to have to be refinanced when the prime rate is 5.25% and occupancy rates have dropped, meaning the building is worth less than it was previously and also the monthly payments are higher as a result of the higher interest rates. Lots of building owners are going to walk away and the banks will have to repossess and resell a bunch of CRE.