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Commercial Real Estate Pro Network

Commercial Real Estate Professionals who work with Investors, Buyers and Sellers of Commercial Real Estate. We discuss todays opportunities, problems & solutions in Commercial Real Estate.
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Now displaying: Page 1
Jul 12, 2022
Neal Bawa, what is the biggest risk,   Neal Bawa  

The biggest risk to the commercial real estate market. So I'll stay away from single family. The biggest risk to commercial real estate family is that the jobs back in 2014, made it very easy to raise money raise have syndicators raise money. And what has happened today is syndicators have become such a massive percentage of the overall multifamily market, that they are inflating the market far, far beyond its fundamentals, not just beyond its fundamental fundamentals, but far far beyond, because their ability to raise money has accelerated far beyond, and far quicker than the property's ability to raise rents. And so that has created a situation where there's a very, very aggressive, all ships raising effect, that is making these properties go far beyond their fundamentals. And that is a very risky situation. We're all in it. I'm in it, even though I'm doing new construction, I'm still in it. And so it's something that we have to really watch very, very closely. I do not believe that it's possible for this bubble to deflate, it has to burst. And so I'm, I'm just being very cautiously watching this to see if there's any evidence of it bursting. And it probably isn't ready to burst yet simply because rents are rising so fast. So to me, the point at which the bubble could burst is, you know, the Feds raising interest rates very, very quickly, they have to do their job because inflation is under control, which means and the Fed is only once out of 10 times succeeded in engineering a soft landing, which means that there's only a 10% chance that we'll have a soft landing, this time, there's a 90% chance we'll end up in a recession. So when that happens, rents could fall. And that I think is the point of greatest risk for the commercial multifamily market that has been flooded by syndicators including myself since 2014. So we've had eight years of crowdfunding and the syndicator flood, we have not seen the bubble bursts, all bubbles by their nature must first. I don't believe in bubbles deflating. It happens sometimes I don't think this one will deflate. So I'm curious to see what happens when rents drop a bit in a recession. And luckily, they don't tend to go down a lot in recessions. Sometimes they won't even go down at all in recessions, right? So most US recessions, rents haven't decline. But if they do start declining, I'm, I wonder what happens to the industry at that point.

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