After half a decade of steadily climbing values, cracks are showing in the strength of the commercial property market, with defaults popping up in overheated areas. And more may be on the way.
“We’re at the top of the market,” says Kenneth Riggs, president of real estate research firm Situs RERC. “There’s going to be a market correction.”
Still, any downturn is not likely to be as severe as the 2008 crash, since lending hasn’t gone quite so crazy, and developers have seldom secured debt over 80% of a project’s value.
Oil-drilling boom towns in Texas and North Dakota are seeing the worst of it, along with oil dependent cities like Houston, where the oil price slump has pushed office vacancy to 23% at the end of 2015. [WSJ]
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