Loss rate on RE loans could rise; stimulus may not do enough for real estate
March 26, 2020 | S&P Global Market Intelligence
Commercial real-estate loans made by banks will suffer a loss rate of up to 2.5% over the next five years because of the COVID-19 coronavirus pandemic and its expected ensuing economic crisis, The Wall Street Journal reported, citing a report by data firm Trepp that analysed 12,500 current loans. This translates to about $57.5 billion on the $2.3 trillion of outstanding commercial real-estate bank loans.
The default rates, however, are expected to be less in number as compared to the previous financial crisis, the report noted.
* The historic $2 trillion stimulus package by the U.S. government to provide economic aid to American citizens and businesses affected by the coronavirus pandemic might not be of much benefit to the real estate industry, according to The Real Deal. The package will offer $1,200 checks to renters who have an income of up to $75,000, the report noted, citing unnamed sources.
The real estate industry is worried that most of the rent due April 1 will not be paid, and that the expected checks are insufficient in high-rent locations like New York.
* The office market in St. Louis stayed strong over the last twelve months, seeing 854,000 square feet of construction and $514.1 million in sales in 2019, totaling nearly 4 million square feet of space, the RE Journals reported, citing the latest research from Avison Young. In the first two months of 2020, there were $96.7 million of transactions involving eight properties totaling 987,098 square feet.
The market also saw a 3.5% increase in rent growth in the last 12 months, with the average asking rent coming to $20 per square foot at the end of 2019.
* Kansas Public Employees Retirement System plans to invest $250 million in real estate funds, comprising a $200 million commitment to the open-ended diversified fund CBRE US Core Partners and a $50 million commitment to the value-add apartment fund Waterton Residential Property Venture XIV, IPE Real Assets reported.
* International Land Alliance Inc. formed a joint venture to co-develop 150 homes at the Bajamar Ocean Front Golf Resort master planned golf community to be built south of the San Diego-Tijuana Border.
* Self-storage real estate investment trust CubeSmart said it is now offering the ability for customers to rent a storage unit without the need to interact with others in-person, promoting social distancing in the time of the coronavirus pandemic.
Source: S&P Global Market Intelligence
