👉The Commercial Real Estate bubble is about to Burst !! Prepare !

👉The Commercial Real Estate bubble is about to Burst !! Prepare !



It has been a wild ride in the economy the past few months, The shutdowns and closures, The unprecedented high unemployment numbers, and now the protests and riots. The commercial real estate market has been clobbered in this crisis, as restaurants and stores virtually shut down entirely. Things are looking bleak for commercial real estate, which has been way overpriced for 20 years. Many commercial real estate investors are starting to feel the pain as the bubble is about to burst. And this is just the beginning. As this Depression deepens, this will have disastrous consequences for house prices. Everyone who owns a house will be affected! My concerns are : 1. The real estate Cycle is due. 2. 40 million unemployed and growing. 3. In 2019, over 90% of US GDP was from consumer retail spending. That ends. 4. 75 million Baby boomers retiring and downsizing. 5. Many small businesses are finished. 6. Markets fall, Real estate follows. 7. Millions of AirBNB’s are in default. 8. The US is officially bankrupt. 9. Loans are harder to get. 10. I believe that the war on cops is the undersold story of this cycle. If cops stand down (Ferguson Effect), many formerly (somewhat) livable areas in big cities will no longer be. I predict a mass exodus out of big cities to the south and the mountain west. 11. People are seeing the effect of working at home, as are businesses. Why pay for that expensive rent, when if need be they could conference with Zoom or whatever for meetings. 12. This is a nationwide bust. It is not just a typical FED bust out the operation. Then throw the COVID effect in there. The peeps, like working at home. And the poorly-run debt-laden corporations might just want to stop paying rent on office space. And this doesn't even count the paradigm shift in folks working from home or the "social distancing" that's going to take place in restaurants and other retailers, which my guess will keep happening five years out, maybe more—a bust-ola for the ages. 13. Commercial Real Estate has been in trouble since the dotcom bubble. Lending requirements made it easier for banks to hide losses because of lending requirements. I thought Commercial Real Estate would blow already in 2007-08, but they got backstopped by the fed, via bailing out all the federal secured lenders. You could shutter 50-60% of restaurants with retail, there still would be too much useless crap, and shitty Wantons to waste money on. 14. 40% of commercial real estate is excess at this point. It will ultimately be torn down or re-purposed, or sit idle for the next ten years or so while the real economy attempts to catch up to the bubble levels that just burst. Lease rates will adjust accordingly. Take appropriate action today. Re-evaluate six months from now. Don't catch the falling knife. Expect prices and lease rates to be on a downward trend for at least the next two years. 15. Malls have been paper shuffling sinking zombies since late 2007. It did not take much to capsize the ship. Pity the young will only know malls as a politician named homeless shelters and methadone clinics. Malls were like Facebook to kids until the smartphone. There is a problem with public spaces in America. They’ve gone downhill along with the class and manners of the public. The decline started with Jerry Springer and earned income credits. Places that only attract inner-city gangbangers, hillybilly trash, imported exotic freaks, and other assorted creeps, don't seem like the best place to be attempting to sell something. Malls, soon to be bought up for pennies and converted into Prisons - I mean Quarantine, er I mean Fusion centers. The shop of the future is going to be a warehouse with new robots in a low-cost area. In a low-cost state. The product is delivered. No more city shop front, mall shop to rent. Wealthy workers? Escaped the city and work from a cottage, village, town—fast networking. No hours lost to car driving, city transport. 16. This is depression, not a recession. Don’t let the manipulated markets and money printing fool you. Equity REITs own more than $2 trillion of physical real estate assets in the U.S., including more than 200,000 properties in all states. Most REITs got margin calls around the week of March 21, 2020. Most REITs are levered 7:1, or more. Banks seized the underlying mortgage bonds via margin calls hence materially reducing the tangible book value of the vast majority of REITs. Some REITs entered forbearance agreements. However, some couldn't and experienced serious capital destruction that is not coming back as a typical stock can. It's very sad to see. Because mostly seniors were persuaded to buy REITs to provide yield income, now they just got 50-80% of their principal stolen, and the price is not coming back unless the FED enforces some type of "refund rule," which is doubtful. Covid-19 pandemic has caused "massive" challenges in the commercial real estate market. The pandemic is reshaping the workplace, which is now more flexible and remote and that could have a lasting impact on the commercial real estate market, especially office space. Many employees are never going to go back to an office, Working from home permanently may be the best thing to come from this crisis. It lowers overhead from renting offices and frees up traffic on the freeways. Using online digital tools will become second nature. Most companies have realized that it's stupid to make white-collar workers, who don't directly manage labor, to sit in an office five days a week when they could come in once a week. Shared office space is where it is going to be at, and no more of this cube. Work from home is where it will be at so 50+% of office space will not be needed. Lots of people are delusional thinking that after the pandemic passes, it's back to business as usual. If your company can live with you permanently working from home, then they can just as well hire a much cheaper employee in another state or another country. When it comes down to it, it doesn't matter whether you work remotely from home in the same city or around the planet. And companies will do whatever it takes to remain profitable. Then comes the real offshore, hiring people in Asia to do all work. Commercial real estate owners are starting to sweat. Over leveraged REITs are going to be annihilated. Because they were leveraged to increase returns with very little cash on hand, but when the market went south. Let the bankruptcy festival begin! They are going to get annihilated. These are really times to reinvent everything. Turn commercial real estate into residential and lower rent in the city, so middle-income people can move there without having to have ten roommates. The problem its like dominos.If some companies move remotely. The rest pretty much have to in order to stay competitive. By the way, there is no real culture in big cities. Why would you rent a studio in Manhatten when you can get a house in the surrounding areas? When people move, so will culture. People create cultures, not cities. I don’t think people are going to want to come back to office life in the city after they’ve had a taste of the freedom and flexibility of working from home or even just being in a less developed area. This will lead to increased profits for companies! The trend will be better remote and online digital collaboration tools. Physical commercial real estate will have to find other uses and change audiences in large. I hope we start to see more people working from home on a permanent basis. It's better for the traffic to keep gas prices and auto insurances low, just to name a few. For the health of the planet and people’s mental health, people should work from home. Commercial real estate is going to go bust. We are in an obscene bubble. Markets near back to where it was before the pandemic, is all based on hope. Much physical retail won't survive, layoffs trickling up to the white-collar, and just wait until the stimulus money ends. The reality is office demand is half what it was 20 years ago because of technology, retail was already suffering because everybody is shopping on Amazon. The cost of Industrial real estate construction has doubled in the past ten years, supposedly due to steel costs so that a plain steel industrial building now costs $80 per square feet before land. Because of poor tax policy that does not depreciate buildings fast enough, many plants operate in obsolete buildings. Recreational properties are also being screwed, mainly due to taxation by revenue starved localities. It’s about the economic mathematical facts! Everyone is a dispensable peasant earning flat humiliating wages. The real estate commercial sector is obscenely an extortionist entity. They are egregiously exaggeratedly overpriced. When has the landlord ever given a credit break? Never hope they go broke! Vacancy is now prevalent in all major cities and suburbs. Just look at all the Manhattan empty, vacant buildings. Welcome back to The Atlantis Report. You are here for your daily dose of the truth, the whole truth, and nothing but the truth. The impact of store closings all across America will be huge and will take a huge toll on communities. Much of this is linked to small businesses having its clock cleaned when forced to shut down because of Covid-19. However, a lot is related to paying higher wages, compiling with new government regulations, online shopping, and being forced to compete with big businesses backed by cheap Wall Street money. Retail and hospitality are the big areas where a lot of investors will see a lot of pain. This has severely impacted commercial real estate, with significant numbers of properties that have been closed. Plenty of businesses have been forced to close their doors due to the current climate conditions, and many won't be able to open up their establishments once this over. The thing is, many of these companies were already on the edge prior to this situation, and this just put them over the edge. Commercial Real Estate delinquencies are already surging. There was a huge jump in the delinquency rate for May 2020. This will also eventually affect the residential real estate market and also real estate investment trusts. When small and medium business is having a hard time paying their rent. It becomes very difficult for landlords when their tenants are not allowed to make any money due to a shutdown. The delinquencies in Commercial Mortgage-Backed Securities (CMBS) surged to 7.15% in May. This is the highest delinquency rate since 2009. CMBS are bonds that hold mortgages of commercial real estate, usually in different sectors. The worst performing commercial real estate sector is retail and hospitality. The problems in commercial real estate, will eventually spread to residential real estate and make the housing market crash. The housing market today and in the future is affected greatly by unemployment and business bankruptcies. Right now, it seems the stock market is ignoring the huge problems in the economy. The Commercial Real Estate Delinquencies Surge Will affect All Real Estate And REIT Stocks. The number of retail space per capita exploded between 2018 and 2020 in America because of the low rates. So, now, the rate will pick up soon enough, no buyers, tons of sellers. Bankruptcy for those who can’t pay the debt by selling assets because demand is low. America all hell is about to break loose. The US retail space per capita is huge compared to the whole rest of the world. The retail space per person in the US is 23.5 square feet. The next biggest one is Canada, which is sixteen point eight, and then. Australia, which is eleven point two and then Japan and other European countries. We are about fifty percent bigger than the next biggest one in Canada and more than double the second biggest one in Australia, and then we're like four or five times most of Europe and everyplace else. There has been too much construction in US real estate. There was a tsunami of oversupply. This means we have a lot of extra retail space, and if they're not paying their mortgages now, there could be a lot of empty retail stores and space. Especially with the headwinds of online retail sales advancing every year. This could be kind of a perfect storm for retail, commercial mortgages and commercial buildings and any kind of retail locations. The number one victim is going to be retail. Retail was already feeling the effect of e-commerce. We already had a very significant oversupply in retail, so retail is probably going to take the biggest hit. The second biggest hit is going to be hospitality, again we built a lot of hotels for the last five years. We were already beginning to see oversupply affecting occupancy unquestionably, but this is going to dramatically make things much worse. We won't see a lot of retailers reopen. I don't think we'll see a lot of hotels reopen either. Now factor in the damage of the shutdowns and the historic high unemployment and the protests. This is a perfect storm for the commercial real estate market. I see another 2000 bubble brewing. One thing I’ve learned about finance is that it takes personal experiences for people to understand any economic impact on them. For example, people in small towns may not feel the impact of economic shutdown like people in cities, so they think everything is fine. But the loss of overall GDP will affect everyone when massive deflation hits their home prices. The devastation will hit everyone; it’s just a matter of time. Economies are not isolated but interwoven internationally. All economies will crash in 2021. ALL. The Fed is simply bailing out their buddies on Wall Street as an exit strategy so they can bunker down while working Americans have to bootstraps the economy back up in a decade, so the leeches can pilfer society once again. The FED is printing a shitload of fiat. And interest rates are a mere fraction of what they were in the late 70s and early 80s. It is very telling. End the FED. This was The Atlantis Report. Please Like. Share. Subscribe. And leave me a comment. 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Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.Dr. Doom also trades currencies and commodity futures like Gold and Oil.