by Calculated Risk on 9/27/2020 12:33:00 PM

Here is an article related to some of the commercial real estate (CRE) scarring from the pandemic recession.

From the Financial Times: Destruction of value in US real estate revealed by appraisal data. The article suggests some CRE valuations have declined 25% since early this year.

We will also see a decline in new CRE construction next year based on the recent architect billings, from the AIA: "Architectural billings in August still show little sign of improvement"

And hotel occupancy is down 32% year-over-year, and RevPAR (Revenue per available room) is down over 50% year-over-year.

The most significant damage will be to malls, hotels and some office properties, and also some losses for commercial mortgage-backed securities (CMBS) investors. The goods news is the CMBS market is much smaller than the residential MBS market, and loan-to-values (LTV) are typically much lower for commercial properties than residential. So this will not be a repeat of the housing bubble (or the S&L crisis of the 1980s and early '90s).