August 15, 2023 | Tumbling Property Prices Bring Opportunity

In the second quarter of 2023, distressed commercial real estate volume grew by $8 billion–the largest quarterly increase since the second quarter of 2020.

The WSJ reports that Wall Street firms are raising new funds to acquire office buildings, apartments and other troubled commercial real estate at a fraction of the price investors paid a few years ago. See, Wall Street Is Ready to Scoop Up Commercial Real Estate on the
Cheap:

“Commercial-property values already have fallen about 10 to 15 percentage points from their peaks in the third quarter last year, and might fall a total of 20 to 25 percentage points.”

Converting commercial into residential space will be part of the rebalancing process needed. Lower prices are part of the equation.

With housing in short supply, developers are converting more empty offices into apartments. But not all buildings are candidates for reuse, even as more than one billion square feet of office space sits vacant across the U.S.

Smart money is waiting for gravity to take its toll on property prices. Real estate busts are a process that typically take quarters and years to complete. See China’s homebuyers are waiting out the property slump:

After a short-lived sales rebound earlier this year, China’s property market has fallen back into a deep slump, developers are having more cash-flow problems and Chinese authorities are trying more ways to revive housing demand.

Potential home buyers are expecting prices to fall and think better deals will emerge if they sit and wait.

Danielle Park August 15th, 2023

Posted In: Juggling Dynamite

Next: The Most Splendid Housing Bubbles in Canada: After a Rocking & Rolling BoC-Pause Season, the First Price Drops Reappear »