Sharp Drop in Commercial Real Estate Prices as Rate Hikes Bite
• Commercial real estate prices have fallen over 11% since March 2022 when the Fed began raising interest rates, reversing previous gains • The current rate of price decline is one of the steepest in the last 50 years, exceeding losses seen in past rate hike cycles • Tighter monetary policy has reduced demand, but remote work trends are also hurting office values in particular • Over $1 trillion in commercial real estate debt matures in the next 2 years, raising default concerns • The IMF warns rising delinquencies could trigger a vicious cycle of tighter lending, falling prices, and losses for banks