In its recently-released bi-annual Financial Stability Report, the Federal Reserve issued a grim warning that asset prices remain vulnerable to significant price declines should the pandemic take an unexpected course. One example in particular, it said, was commercial real estate.
CRE prices were already high relative to fundamentals before the pandemic, it noted, and disruptions in the hospitality and retail sectors have been severe.
"The vulnerability stemming from elevated CRE valuation pressures, coupled with a dim outlook for the sector as indicated by recent declines in equity REIT prices, suggests that CRE may undergo a substantial repricing in response to disruptions generated by the COVID-19 pandemic," it said.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
