We’re in a turbulent economic environment right now, and the headwinds are piling together, putting up an ominous cloud on the financial horizon. Billionaire Leon Cooperman, the CEO of Omega Advisors, has noted the coming storm, and sees the commercial real estate market as the eye of the developing hurricane.
In Cooperman’s view, several factors are about to hit hard at commercial real estate: first, declining occupancy rates; second, rising interest rates; and third, reduced credit access in a tighter monetary regime. These three will, together, exacerbate a fourth: the impending rollover of commercial real estate debt, that was originally financed when interest rates were low. Added to this, small- to mid-sized banks make up some 80% of the commercial real estate lending market, and if that market crashes, we could see a rash of bank failures.