People accuse me of being overly pessimistic when it comes to commercial real estate. They may be right but I want to offer a similar opinion I found in an interview of Andy Miller. Mr. Miller has a real estate consulting firm, www.millerfrishman.com. This is an interview he had with Business Insider about the commercial real estate market.
He gives a very readable explanation as to why the CRE market is going to eventually implode. The basic reason is that valuations got way too out of control. Lenders were loaning more money than commercial properties were worth. A loan that was advertised as 80% LTV was really well over 100% LTV. These gross over valuations coupled with the fact that banks aren’t lending and consumers aren’t spending will result in a CRE train wreck.