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Damn, there is little Pudding-Brain Xiden hasn't destroyed. This one is going to be a nightmare.
CRE Storm: Over $800 Billion In Office Space In Nine Cities Could Become Obsolete By 2030 (Office Vacancy Rates Soar As Fed Went Crazy With Stimulus)
Thanks to The Federal Reserve, office property values have gone crazy despite rising vacancy rates.
US office space vacancies (white line) have soared since 2008 as The Fed’s massive monetary expansion (blue and green line) has not helped. But Fed monetary expansion DID help drive office prices! At least until 2022, when office space values began to fall. Notice that office values are falling as The Fed withdraws monetary stimulus.
Then we have this nice ZeroHedge piece on office space.
During the regional bank failures in March, we directed our readership to focus on the next potential crisis: “CRE Nuke Goes Off With Small Banks Accounting For 70% Of Commercial Real Estate Loans.” By late March, Morgan Stanley warned clients of an upcoming maturity wall in commercial real estate, which amounts to $500 billion of loans in 2024, and a total of $2.5 trillion in debt that comes due over the next five years.
In a recent Bloomberg interview, Barry Sternlicht’s Starwood Capital Group warned that the CRE space is in a “Category 5 hurricane.” He said, “It’s sort of a blackout hovering over the entire industry until we get some relief or some understanding of what the Fed’s going to do over the longer term.”
The current downturn in CRE could persist for years, if not through the end of this decade. Jan Mischke, a partner at the McKinsey Global Institute, along with Olivia White, a senior partner at McKinsey, and Aditya Sanghvi, a senior partner and leader of McKinsey’s real estate special initiative, published a note in Fortune, warning “$800 billion of office space in just nine cities could become obsolete by 2030.”
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more in the link
And as that article notes, there are dozens of banks (with hundreds of billions, even perhaps trillions) in deposit by millions of customers. These banks are facing an implosion when the commercial real estate building owners tell the banks, "Sorry, not paying the loan, the building is yours."
At that point, the banks are insolvent since they have billions and billions of dollars in loans that are not being paid and instead owe maintenance costs and property taxes on the buildings.
And hey guess what? Those buildings generate MASSIVE tax revenues for local governments that are going to disappear. Think things are bad in San Francisco, Los Angeles, Chicago and New York right now? Wait until a large portion of their tax revenues go buh-bye.
So of course we can expect the Fed to jump in and spend trillions they don't have. Gee, good thing another group of nations has not developed a currency backed by gold to replace the dollar, since otherwise, hoo-boy, hell 100% inflation. Great news for retirees! Yipee for Jimmy!
