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Bill Ackman, Bank of America and JP Morgan have all warned that commercial real estate could trigger an economic shock.
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But according to Goldman Sachs, they shouldn’t be so upset by the struggling sector.
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The risk of a “vicious cycle of large leverage losses” is limited, the strategist said in a research note.
As the panic over the US rural banking sector begins to subside, there seem to be three words on every investor’s mouth: commercial real estate.
big names ranging from Bill Ackman and Elon Musk join Bank of America and JP Morgan Goldman Sachs bucked the trend this week after predicting troubled sectors would be the next crack in the US financial system.
“The risk of a vicious cycle of large leverage losses and undercapitalized balance sheets posing a threat to financial stability remains limited,” strategists Lotfi Karui and Vinay Viswanathan said in a research note released Monday. said.
Goldman Sachs’ view clashes with analysts like Bank of America’s Michael Hartnett. research notes Last week, commercial real estate “next shoe As a lending standard … tougher.”
Hartnett believes a wave of refinancing of commercial real estate loans at much higher interest rates than in the past could trigger a credit crunch in the sector, sending stocks soaring and pushing the economy into recession. .
The collapse of Silicon Valley Bank and Signature last month could further fuel the turmoil in commercial real estate. Lenders looking to shrink their balance sheets may be reluctant to provide loans to property owners.
Karoui and Viswanathan foresee big problems in the office sector, where other strategists have voiced concerns as well, but apartments, manufacturing plants, warehouses, and other types of commercial real estate are capital-rich. , I don’t think so. Hit by a big crash.
Goldman Sachs strategists say: “We expect office loan delinquencies to rise significantly, but given stronger fundamentals in other commercial real estate subsectors, this translates into systemic risk. I think it’s unlikely,” he said.
The turmoil is likely to be limited to office loan delinquencies, he said, “given stronger fundamentals in other commercial real estate subsectors such as apartments and industrial real estate, as well as other parts of the credit market.” added Karui and Viswanathan.
Read the original article at business insider
