VNQ - Commercial Real Estate Distress Rates Are Still Rising With No End In Sight

2024-07-04 07:42:31 ET

Summary

• The Federal Reserve held interest rates steady for the seventh consecutive month at the June meeting.
• Forecasts are predicting rates will be held steady once again at the July meeting with one rate cut predicted by the end of the year.
• Distress rates continue to rise across commercial real estate as elevated interest expenses collide with deteriorating asset-level performance.
• Loan modifications are increasing as borrowers and lenders use the "extend and pretend" strategy to address non-performing loans and poor asset-level performance.

Over the past six months, we have covered the broad tumult facing the real estate sector (VNQ). Following an unprecedented era of rising interest rates, real estate has struggled to find its footing in a radically different financial environment. We have discussed factors contributing to the broad increases in distressed assets across asset classes and warned of the upcoming wall of maturities....

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