Oil prices are going through the floor ($26.92/barrel) and stock prices are following suit, as investors put cash into US bonds and gold. Bisnow talked to Beacon Economics principal Christopher Thornberg and Harvard economist Ray Torto for their take on what this means for US commercial real estate.
Christopher tells us that the slump is ultimately good tidings. “Low oil prices mean weak inflation, and this in turn means ongoing low interest rates,” Christopher says.
The market panic will see commercial real estate cool off for a bit as investors seek safety from perceived risk, Christopher tells us. "There'll be a waiting period," he says, before the market realizes commodities won't drive a "general downturn in the US economy."
Ray is similarly optimistic. He tells Bisnow commercial real estate is still strong, provided stock selloffs don’t lead to an economic recession. "At this moment, I don't expect as much."
Ray says the selling binge comes from high valuations and global economic worries. Despite his optimism, Ray tells us there’s an “asymmetric risk” to downside in equity markets, something that holds true for commercial real estate, as well, he tells us. “Prices do not go up in this environment.”
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