There's been some rumblings about how commercial real estate is the next bubble (somewhat mirroring 2008's crash with residential real estate) that will pop and create the next cataclysmic recession.
I sympathize with the Mark Baum depiction in the Big Short.. as just in my large urban city, retail and commercial stores/companies are quietly closing and vacating left and right. Restaurants that have been cultural staples for decades, gone overnight… major retail chains closing down locations in high traffic areas (CVS for example), companies vacating their commercial office buildings for smaller locations as a result of WFH, etc…… YET, the general market sentiment still seems bullish as everyone is expecting fund rates to pause as inflation has been decelerating.
It feels like something is going to eventually break.. but I don't understand enough about commercial real estate to understand how. Seems like a lot of commercial real estate and lending is all private owned.. so trying to understand if there even is a play to 'profit' on a commercial real estate collapse.
To give a specific example:
> Microsoft has confirmed this year that they will not be renewing their lease at City Center Plaza in Bellevue in 2024.
> In the midst of Microsoft's exit, the building owner, CommonWealth Partners LLC, will have to continue to foot the bill for the building.
> Who is lending money to these building owners? What happens if the building owners can't pay back the lenders.. or pay the taxes? Does everything implode on the private side?
And if everything implodes on the private side and/or local governments aren't getting their tax money.. what happens then and is there a financial play from the stock market perspective?
Sorry that this isn't directly related to stocks… just trying to understand how this fits into the bigger picture narrative that we are (or maybe aren't) headed to a cataclysmic recession.
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