Everyone can see the slow-motion train wreck that is unfolding right in front of our eyes, but nobody has a plan to stop it. Unfortunately, from a short-term perspective I don’t know if there is anything that can be done to prevent the commercial real estate bubble from imploding. Vacancy rates are surging to historic highs all over the nation, and without sufficient rental income many property owners will be forced to default.
In addition, a giant mountain of commercial real estate mortgages will be up for refinancing over the next few years, and substantially higher interest rates will make refinancing those mortgages exceedingly difficult. We really are facing a “perfect storm” for the commercial real estate industry, and the fallout is going to be absolutely devastating for U.S. banks.
This is not a small problem. Offices are sitting empty from coast to coast, and the total commercial real estate market in this country is currently valued at somewhere around 20 trillion dollars…
From Dallas and Minneapolis to New York and Los Angeles, offices sit vacant or underused, showing the staying power of the work-from-home era. But clear desks and quiet break rooms aren’t just a headache for bosses eager to gather teams in person.
Investors and regulators, on high alert for signs of trouble in the financial system following recent bank failures, are now homing in on the downturn in the $20 trillion US commercial real estate market.
The pandemic sparked a “remote work” revolution, and now we have a lot of office space that is simply not needed any longer.
In fact, office vacancies in Manhattan are now at the highest level ever recorded…
In New York’s Manhattan, office vacancies are at a record high, Bloomberg reported last week, even as new properties come online, adding even more space to the struggling market. And in Los Angeles and Chicago, office vacancies sat at 22.5% as of the fourth quarter of 2022.
This is a huge problem for property owners, because many of them don’t have enough tenants paying rent.
And as I mentioned earlier, an enormous pile of commercial mortgages “will be up for refinancing in the next couple of years”…
They are a bellwether for what is likely to come, as more than half of the $2.9 trillion in commercial mortgages will be up for refinancing in the next couple of years, according to Morgan Stanley.
“Even if current rates stay where they are, new lending rates are likely to be 3.5 to 4.5 percentage points higher than they are for many of CRE’s existing mortgages,” wrote Morgan Stanley Chief Investment Officer Lisa Shalett, in a recent report.
In the end, we are going to see an unprecedented wave of defaults and commercial property prices are going to crash really hard.
As I noted yesterday, Morgan Stanley is actually warning that commercial property prices “could fall as much as 40%”…
With small- and medium-size banks accounting for 80% of commercial real estate lending, the situation might soon get worse, says experts.
Commercial property prices could fall as much as 40% “rivaling the decline during the 2008 financial crisis,” forecast Morgan Stanley analysts.
Actually, I believe that projection is probably too optimistic.
At this point, commercial property prices are already down 15 percent from the peak of the market…
Prices in the United States were down 15% in March from their recent peak, according to data provider Green Street. The rapid increase in interest rates over the past year has been painful, since purchases of commercial buildings are typically financed with large loans.
In some markets, the carnage that we have already seen is quite breathtaking. For example, Blackstone recently sold two office towers in southern California at a 36 percent loss…
Private equity firm Blackstone sold two 13-story Class A office towers, the Griffin Towers, in Santa Ana, Orange County, California, for $82 million to a joint venture between Barker Pacific Group and Kingsbarn Realty Capital. The towers, built in 1987, have a vacancy rate of 24%.
Blackstone had bought the towers in 2014 for $129 million, according to the Commercial Observer yesterday. The selling price makes for a loss of 36%. And Blackstone was lucky on this deal.
And an office tower in Houston just sold at a loss of 47 percent…
In Houston, Parkway Property sold the 960,000-sf San Felipe Plaza in Uptown, to Sovereign Partners for $82.8 million in late March. The tower was built in 1984. Parkway Property ended up with the tower when it acquired Thomas Properties, which had bought the property in 2005 for $156.5 million. So this was a loss of 47%.
I don’t know why anyone would be willing to purchase commercial real estate at this stage.
Trying to catch a falling knife is a very dangerous thing. Of course commercial real estate is not the only bubble that is bursting.
We have already seen the crypto bubble burst, we have seen the bond bubble burst, and residential real estate prices are starting to fall all over the nation.
So far, stock prices are hanging in there, but a number of experts are warning that a big crash is just around the corner…
Legendary investor Jeremy Grantham has topped the board for an extreme prediction about US stocks. The market historian has forecasted the S&P 500 could tank as much as 50% this year to about 2,000, as an “everything bubble” bursts.
Grantham said the prices of stocks, bonds, real estate, fine art, and other investments surged to unsustainable highs during the COVID-19 pandemic.
Market experts Stephanie Pomboy and Larry McDonald echoed Grantham’s view – but with a less bearish prediction. While the pair expect stocks to crash as much as 30%, McDonald said the plunge could happen over the next two months as higher interest rates choke demand.
Our leaders were able to artificially prop up the system for a number of years, but now they have lost control.
A great financial earthquake has begun, and things are going to get really bad during the years that are in front of us.
But many people out there truly believed that the party would last forever, and so now they are in a position to get very badly burned as the system melts down all around them.
Michael’s new book entitled “End Times” is now available in paperback and for the Kindle on Amazon.com, and you can check out his new Substack newsletter right here.
About the Author: My name is Michael and my brand new book entitled “End Times” is now available on Amazon.com. In addition to my new book I have written six other books that are available on Amazon.com including “7 Year Apocalypse”, “Lost Prophecies Of The Future Of America”, “The Beginning Of The End”, and “Living A Life That Really Matters”. (#CommissionsEarned) When you purchase any of these books you help to support the work that I am doing, and one way that you can really help is by sending copies as gifts to family and friends. Time is short, and I need help getting these warnings into the hands of as many people as possible. I have also started a brand new Substack newsletter, and I encourage you to subscribe so that you won’t miss any of the latest updates.
Coffee the Christian way: Promised Grounds
I have published thousands of articles on The Economic Collapse Blog, End Of The American Dream and The Most Important News, and the articles that I publish on those sites are republished on dozens of other prominent websites all over the globe. I always freely and happily allow others to republish my articles on their own websites, but I also ask that they include this “About the Author” section with each article. The material contained in this article is for general information purposes only, and readers should consult licensed professionals before making any legal, business, financial or health decisions.
I encourage you to follow me on social media on Facebook and Twitter, and any way that you can share these articles with others is definitely a great help. These are such troubled times, and people need hope. John 3:16 tells us about the hope that God has given us through Jesus Christ: “For God so loved the world, that he gave his only begotten Son, that whosoever believeth in him should not perish, but have everlasting life.” If you have not already done so, I strongly urge you to invite Jesus Christ to be your Lord and Savior today.
Article cross-posted from The Economic Collapse Blog.
Five Things New “Preppers” Forget When Getting Ready for Bad Times Ahead
The preparedness community is growing faster than it has in decades. Even during peak times such as Y2K, the economic downturn of 2008, and Covid, the vast majority of Americans made sure they had plenty of toilet paper but didn’t really stockpile anything else.
Things have changed. There’s a growing anxiety in this presidential election year that has prompted more Americans to get prepared for crazy events in the future. Some of it is being driven by fearmongers, but there are valid concerns with the economy, food supply, pharmaceuticals, the energy grid, and mass rioting that have pushed average Americans into “prepper” mode.
There are degrees of preparedness. One does not have to be a full-blown “doomsday prepper” living off-grid in a secure Montana bunker in order to be ahead of the curve. In many ways, preparedness isn’t about being able to perfectly handle every conceivable situation. It’s about being less dependent on government for as long as possible. Those who have proper “preps” will not be waiting for FEMA to distribute emergency supplies to the desperate masses.
Below are five things people new to preparedness (and sometimes even those with experience) often forget as they get ready. All five are common sense notions that do not rely on doomsday in order to be useful. It may be nice to own a tank during the apocalypse but there’s not much you can do with it until things get really crazy. The recommendations below can have places in the lives of average Americans whether doomsday comes or not.
Note: The information provided by this publication or any related communications is for informational purposes only and should not be considered as financial advice. We do not provide personalized investment, financial, or legal advice.
Secured Wealth
Whether in the bank or held in a retirement account, most Americans feel that their life’s savings is relatively secure. At least they did until the last couple of years when de-banking, geopolitical turmoil, and the threat of Central Bank Digital Currencies reared their ugly heads.
It behooves Americans to diversify their holdings. If there’s a triggering event or series of events that cripple the financial systems or devalue the U.S. Dollar, wealth can evaporate quickly. To hedge against potential turmoil, many Americans are looking in two directions: Crypto and physical precious metals.
There are huge advantages to cryptocurrencies, but there are also inherent risks because “virtual” money can become challenging to spend. Add in the push by central banks and governments to regulate or even replace cryptocurrencies with their own versions they control and the risks amplify. There’s nothing wrong with cryptocurrencies today but things can change rapidly.
As for physical precious metals, many Americans pay cash to keep plenty on hand in their safe. Rolling over or transferring retirement accounts into self-directed IRAs is also a popular option, but there are caveats. It can often take weeks or even months to get the gold and silver shipped if the owner chooses to close their account. This is why Genesis Gold Group stands out. Their relationship with the depositories allows for rapid closure and shipping, often in less than 10 days from the time the account holder makes their move. This can come in handy if things appear to be heading south.
Lots of Potable Water
One of the biggest shocks that hit new preppers is understanding how much potable water they need in order to survive. Experts claim one gallon of water per person per day is necessary. Even the most conservative estimates put it at over half-a-gallon. That means that for a family of four, they’ll need around 120 gallons of water to survive for a month if the taps turn off and the stores empty out.
Being near a fresh water source, whether it’s a river, lake, or well, is a best practice among experienced preppers. It’s necessary to have a water filter as well, even if the taps are still working. Many refuse to drink tap water even when there is no emergency. Berkey was our previous favorite but they’re under attack from regulators so the Alexapure systems are solid replacements.
For those in the city or away from fresh water sources, storage is the best option. This can be challenging because proper water storage containers take up a lot of room and are difficult to move if the need arises. For “bug in” situations, having a larger container that stores hundreds or even thousands of gallons is better than stacking 1-5 gallon containers. Unfortunately, they won’t be easily transportable and they can cost a lot to install.
Water is critical. If chaos erupts and water infrastructure is compromised, having a large backup supply can be lifesaving.
Pharmaceuticals and Medical Supplies
There are multiple threats specific to the medical supply chain. With Chinese and Indian imports accounting for over 90% of pharmaceutical ingredients in the United States, deteriorating relations could make it impossible to get the medicines and antibiotics many of us need.
Stocking up many prescription medications can be hard. Doctors generally do not like to prescribe large batches of drugs even if they are shelf-stable for extended periods of time. It is a best practice to ask your doctor if they can prescribe a larger amount. Today, some are sympathetic to concerns about pharmacies running out or becoming inaccessible. Tell them your concerns. It’s worth a shot. The worst they can do is say no.
If your doctor is unwilling to help you stock up on medicines, then Jase Medical is a good alternative. Through telehealth, they can prescribe daily meds or antibiotics that are shipped to your door. As proponents of medical freedom, they empathize with those who want to have enough medical supplies on hand in case things go wrong.
Energy Sources
The vast majority of Americans are locked into the grid. This has proven to be a massive liability when the grid goes down. Unfortunately, there are no inexpensive remedies.
Those living off-grid had to either spend a lot of money or effort (or both) to get their alternative energy sources like solar set up. For those who do not want to go so far, it’s still a best practice to have backup power sources. Diesel generators and portable solar panels are the two most popular, and while they’re not inexpensive they are not out of reach of most Americans who are concerned about being without power for extended periods of time.
Natural gas is another necessity for many, but that’s far more challenging to replace. Having alternatives for heating and cooking that can be powered if gas and electric grids go down is important. Have a backup for items that require power such as manual can openers. If you’re stuck eating canned foods for a while and all you have is an electric opener, you’ll have problems.
Don’t Forget the Protein
When most think about “prepping,” they think about their food supply. More Americans are turning to gardening and homesteading as ways to produce their own food. Others are working with local farmers and ranchers to purchase directly from the sources. This is a good idea whether doomsday comes or not, but it’s particularly important if the food supply chain is broken.
Most grocery stores have about one to two weeks worth of food, as do most American households. Grocers rely heavily on truckers to receive their ongoing shipments. In a crisis, the current process can fail. It behooves Americans for multiple reasons to localize their food purchases as much as possible.
Long-term storage is another popular option. Canned foods, MREs, and freeze dried meals are selling out quickly even as prices rise. But one component that is conspicuously absent in shelf-stable food is high-quality protein. Most survival food companies offer low quality “protein buckets” or cans of meat, but they are often barely edible.
Prepper All-Naturals offers premium cuts of steak that have been cooked sous vide and freeze dried to give them a 25-year shelf life. They offer Ribeye, NY Strip, and Tenderloin among others.
Having buckets of beans and rice is a good start, but keeping a solid supply of high-quality protein isn’t just healthier. It can help a family maintain normalcy through crises.
Prepare Without Fear
With all the challenges we face as Americans today, it can be emotionally draining. Citizens are scared and there’s nothing irrational about their concerns. Being prepared and making lifestyle changes to secure necessities can go a long way toward overcoming the fears that plague us. We should hope and pray for the best but prepare for the worst. And if the worst does come, then knowing we did what we could to be ready for it will help us face those challenges with confidence.
