NewsPour 9.18.23
Recent real estate news headlines…
The Big Short Investor Predicts Defaults
Famous investor Kyle Bas portrayed in the popular book The Big Short is in the news again. Once again he is making a real estate market prediction. This time he predicts commercial real estate and the office property sector will cost banks as much as $250 billion in defaults. On the other hand, he remains positive on industrial and multifamily properties. In particular he believes artificial intelligence will drive even more demand for data centers. He also favors converting underperforming office buildings in some urban core markets into different real estate classes. Watch a discussion on our YouTube video here.
New AI Real Estate Trends
Artificial Intelligence (AI) companies and investments tend to cluster around established tech markets. Going forward, growth is likely to be concentrated in tech hubs, innovation centers and universities. In the U.S., for example, 42% of AI companies are concentrated in the San Francisco Bay Area, followed by Boston, Seattle and New York. Startup growth is expected to continue to center around these major tech hubs in the near future. AI also requires infrastructure. This will drive the need for more power, more cooling facilities and data centers and connectivity infrastructure in less crowded and business friendly markets such as Atlanta in the U.S. Watch a discussion on our YouTube video here.
Credit Crunch in Real Estate
Many banks are tightening credit and pulling away from loaning money particularly in the office property market. Indirect lending—along with foreclosed properties, trading portfolios and other assets linked to commercial properties—brings banks’ total exposure to commercial real estate to $3.6 trillion, according to a Wall Street Journal analysis. That’s equivalent to about 20% of their deposits. Banks are under pressure to pay depositors more to keep customers from fleeing to higher-yielding investment alternatives. Without cheap deposits, banks have less money to lend and to absorb losses from loans that go bad. Watch a discussion on our YouTube video here.