{"id":1004667323,"date":"2023-06-12T02:49:15","date_gmt":"2023-06-12T10:49:15","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004667323"},"modified":"2023-06-22T03:50:50","modified_gmt":"2023-06-22T11:50:50","slug":"costello-expects-cre-debt-to-outperform-gfc","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/costello-expects-cre-debt-to-outperform-gfc\/","title":{"rendered":"Costello Expects CRE Debt to Outperform GFC"},"content":{"rendered":"
\"Jim<\/a>

Jim Costello at NAREE 2023. Image by Suzann D. Silverman<\/em><\/p><\/div>\n

The big challenges for commercial real estate will occur this year and the next, according to Jim Costello. And they depend upon when loans come due, how much financing is available and whether the debt markets shut down as they did during the Great Financial Crisis. However, he does not expect recovery to mimic that from the last downturn, advising the need for a different toolset this time around.<\/p>\n

Indeed, debt is still available, the chief economist at MSCI Real Assets<\/strong> told the audience at the National Association of Real Estate Editors<\/strong> annual conference last week. But commercial assets face negative leverage, making it too costly to use debt today. \u201cThere\u2019s another shoe to drop in pricing,\u201d he cautioned, noting that owners need to stop waiting for mortgage rates to go back down and give up some pricing so cap rates can go back up.<\/p>\n

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READ ALSO:<\/strong> Weakened CRE Activity Pressures Some REIT Ratings<\/a><\/p>\n

\n

While the first quarter saw higher-than-average sales performance, and retail essentially matched the average, in April every sector saw negative growth in deal volume year-over-year, he found. And that change in deal activity was low enough to bring the year-over-year change into negative territory for year-to-date volumes, as well. Total volume in April, at $17.6 billion, dropped 72 percent on a year-over-year basis; year-to-date sales, at $106.8 billion, dropped 59 percent.<\/p>\n

Year-to-date, the office and apartment sectors tied for the greatest drop of 66 percent each (with $14.3 billion and $33.6 billion total volume, respectively), while senior housing and care experienced the lowest decline of 29 percent (but just $3 billion in properties traded). There were double-digit decreases across major, secondary and tertiary markets.<\/p>\n

$2 trillion in loans to be refinanced through 2027<\/h2>\n

In all, $2 trillion in loans will need to be refinanced in the years through 2027, according to Costello. And while CMBS continues to supply the largest portion of debt financing, last year marked a change in lender composition: Banks\u2019 share increased<\/a> to 27 percent of all lending, local and regional banks in particular assuming a larger\u2014though still relatively small\u2014portion. Expect that share to continue to grow, though, as deal activity shifts to the smaller markets where they are the more dominant players.<\/p>\n

However, he views that as a natural circumstance of the market. \u201cIt\u2019s not something to be scared of,\u201d Costello affirmed. \u201cIt\u2019s just the markets moving away \u2026 to a more sustainable market situation.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

MSCI Real Assets’ chief economist tells NAREE conference to look for challenges in 2023 and 2024.<\/p>\n","protected":false},"author":755,"featured_media":1004667324,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21808,21825,22251,23891,21742,51037],"tags":[35826,35044,40671],"class_list":["post-1004667323","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-featured","category-finance","category-in-focus","category-national","category-latest","category-trends","tag-cmbs","tag-jim-costello","tag-national-association-of-real-estate-editors"],"acf":[],"yoast_head":"\nCostello Expects CRE Debt to Outperform GFC - Commercial Property Executive<\/title>\n<meta name=\"description\" content=\"Commercial real estate's big challenges will occur this year and the next, according to Jim Costello, chief economist at MSCI Real Assets.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/costello-expects-cre-debt-to-outperform-gfc\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Costello Expects CRE Debt to Outperform GFC\" \/>\n<meta property=\"og:description\" content=\"Commercial real estate's big challenges will occur this year and the next, according to Jim Costello, chief economist at MSCI Real Assets.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/costello-expects-cre-debt-to-outperform-gfc\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2023-06-12T10:49:15+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-06-22T11:50:50+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2023\/06\/Jim-Costello-at-NAREE-2023-e1686563177724.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"900\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Suzann D. 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