Odd Lots Where Stress Is Showing in the $20 Trillion Commercial Real Estate Market
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Mar 20, 2023 
Rich Hill, head of real estate strategy & research at Cohen & Steers, dives into the $20 trillion commercial real estate market. He discusses how higher interest rates and a slow return to pre-Covid office occupancy are causing significant stress. The conversation highlights various asset classes, illustrating stark differences in performance between urban centers and Sunbelt states. Rich explores the challenges of refinancing amidst economic pressures and the complexities of property valuations in this shifting landscape.
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Lag in Private CRE Valuations
- Private CRE valuations can take 12-24 months to correct to listed market levels.
- This lag is due to low transaction volumes and seller reluctance to accept lower prices initially.
Refinancing Risk in CRE
- Declining interest rates have historically allowed CRE refinancing at lower costs.
- This trend reversed in 2022, creating a different dynamic with rising financing costs.
CRE Debt Maturity Wall
- The average loan-to-value (LTV) ratio in CRE is around 25%, with annual maturities of $500B.
- Most maturing debt in 2023 originates from 2013 or 2018, with varying property price appreciation.