Commercial real estate shows cautious signs of optimism despite interest rate headwinds
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Commercial real estate has struggled recently due to higher interest rates and changes in how people work and shop, but some analysts see signs of optimism, especially in commercial mortgage-backed securities.
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Interest rates are key - if rates peak and start to fall, it would benefit commercial real estate significantly. But steady high rates could mean a longer recovery period.
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Commercial mortgage-backed securities (CMBS) have outperformed other assets like Treasuries and corporate bonds in 2023, signaling they may lead a rebound.
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While some regional banks like New York Community Bank have suffered large losses on commercial real estate loans, they likely won't trigger systemic risk.
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Commercial real estate encompasses a broad range of property types - some like suburban offices and newer Class A buildings continue to do well.