According to one star, the commercial real estate sector is on the brink of 'collapse'.
s unique about this situation and I'll just lay it out, many of these are office spaces that are in sub-grade markets. Even in cities like Boston, you find lots of vacancies, you know, up to 40% of buildings, 'Ostar' cities - San Francisco, New York, Houston, London, Paris, Munich, Tokyo, Beijing and Shanghai - and estimated that office employment is currently about 30 percent lower than the typical pre-pandemic level seen in 2019.
But the consultancy forecasts that admission would still remain about 13% lower in 2030 compared to before the pandemic began.
On average, the total value of office space in the nine cities could plummet by 26% from 2019 to 2030 - or a decline of roughly $800 billion.
s big problems, and it's going to manifest itself in these regionals over the next 36 months, he said.
Commercial space crisis extends beyond office spaces, as well as corporate spaces. The regional banks were at the epicenter of the upheaval within the financial sector, and there are worries that the turmoil could make.
Banks are significantly increasing their lending rates during a credit crunch, making it difficult for businesses or households to obtain loans. Borrowers may have to agree to stricter terms like high interest rates, as banks aim to reduce financial risk on their end.
Even before the collapse of Silicon Valley Bank and Signature Bank in early March, the real estate industry was grappling with various problems, such as rising interest rates and waning demand for office space as more companies allow employees to work from home.
Ochaos' impact could have a worsening effect on small business beyond the housing sector.
The Star also mentioned a recent pause in the employee retention credit. The IRS's decision to stop accepting claims for refunds was largely due to concerns about fraud in the program.
The employee retention credit was a COVID-era tax credit that was designed to help small businesses keep employees and maintain at least partial operation during the pandemic. While the credit ended in October 2021, companies were allowed to apply retroactively until the IRS pause happened in the year 2021.
As of the beginning of the program, the IRS has received 3.6 million claims, but among those claims are a growing number of applications considered fraudulent.
While the commercial real estate industry has not hit rock bottom, O'Leary warns that the worst is yet to come.
They're alive because of employee retention credits, he said. These programs are not aligned. So we get the pressure at the regional banks, commercial real estate collapse and small business not getting any capital.