The commercial real estate downturn is still underway, posing significant risks for investors across financial markets. CRE-linked equities, corporate credit, structured credit, and private markets all feel the impacts of major unwinds as property prices plunge. 

While headwinds from high interest rates may diminish in the coming quarters, with rate traders pricing in the possibility of the first 25bps cut as early as the mid-September FOMC meeting, the critical question is whether these projected rate cuts will be adequate to cushion the landing. 

Office tower valuations remain sloped in a downward trend, plummeting in many cases, as vacancy rates soar as remote work trends keep blue-collar workers out of the office and at home. These imploding values remain a massive threat to regional banks, with the CRE crisis likely to persist through 2025. 

X user Triple Net Investor offers a sobering reality of the CRE space. He closely follows the space and noted dozens of recent valuation declines for malls, towers, and multi-family properties. 

Here are the examples of why the CRE storm is not over:

One of Maryland’s largest malls, called White Marsh Mall, located in a northeast suburb of Baltimore County, had a stunning valuation plunge of $240 million over a little more than a decade. The property was once valued at $320 million in 2013 – it now has a valuation of around $80 million.

One of the largest malls in Baltimore has plunged a shocking $320M in value since 2013

A recent appraisal valued the White Marsh Mall at $80M, down from $300M in 2013

A receiver was appointed to take control of the 1.2M sq ft mall earlier this yr

This is one of many… pic.twitter.com/ajriEkumPo

— Triple Net Investor (@TripleNetInvest) July 29, 2024

“This is a commercial real estate apocalypse,” Triple Net Investor said. 

Wow, this is absolutely crazy…

Brookfield owned Gas Company Tower in Downtown LA has plummeted over $400M in value

The skyscraper was recently valued at $214.5M

It was appraised at $632M just 3 years ago

This is a commercial real estate apocalypse

Source: Commercial… pic.twitter.com/UFZuExcqz7

— Triple Net Investor (@TripleNetInvest) July 26, 2024

He said, “This is absolutely insane.” 

This is absolutely insane…

A Chinese investor is acquiring a skyscraper in Downtown Los Angeles for $120m…

Or a stunning ~$170M LESS than the debt owed

Brookfield recently defaulted on a $319M loan tied to the property – at the time of default ~$290M was outstanding on the… pic.twitter.com/dDxORkTLgi

— Triple Net Investor (@TripleNetInvest) July 25, 2024

He pointed out Trump’s “incredibly well-timed deal” to sell the Trump International Hotel in 2022. 

This is an incredibly well-timed deal pulled off by Donald Trump…

In 2022 he sold The Trump International Hotel in Washington DC for $375M at the absolute top of the market

Fast forward and the buyer recently defaulted on a $285M loan tied to the hotel after rebranding it to… pic.twitter.com/f2mIUDn5fR

— Triple Net Investor (@TripleNetInvest) July 23, 2024

A multi-family complex in foreclosure in Dallas, Texas. 

This trend is very concerning…

518 apartment units faces foreclosure in Dallas, Texas

– Tides at Whispering Hill: 314 units
– Tides at Lawler East: 204 units

The total loan stood at $35M or ~$67K a unit

First office buildings fell off a cliff…

Now… pic.twitter.com/f4F8ZvJyod

— Triple Net Investor (@TripleNetInvest) July 20, 2024

He said, “Blackstone has filed to foreclose on the 33-story McGraw-Hill skyscraper in the Hell’s Kitchen neighborhood of Manhattan.” 

This is absolutely nuts…

Blackstone has filed to foreclose on the 33-story McGraw-Hill skyscraper in the Hell’s Kitchen neighborhood of Manhattan

The debt was originally financed by Signature Bank

Things have gone from bad to worse in NYC and it doesn’t look like things are… pic.twitter.com/jZyYFB1f0q

— Triple Net Investor (@TripleNetInvest) July 19, 2024

And this. 

This is absolutely brutal…

Goldman Sachs and Ballast are set to surrender 82 apartment buildings (~1,200 units) in San Francisco to lender Royal Bank of Canada

They recently defaulted on loans totaling $687.5M

The apartments were purchased between 2017 and 2020 for $704M… pic.twitter.com/5o5HTkEqrs

— Triple Net Investor (@TripleNetInvest) July 18, 2024

More pain. 

BREAKING NEWS:

The owner of San Francisco’s largest apartment community has defauled on ~$1.8B in loans tied to the complex

The 152 acre, 3,200 unit apartment community known as Parkmerced was just appraised at $1.4B, plummeting $700M from 2019 and $400M less than the total… pic.twitter.com/EzBH2nk1fS

— Triple Net Investor (@TripleNetInvest) July 16, 2024

It just gets worse.

BREAKING NEWS:

EJM Equities has defaulted on an office complex in a upscale neighborhood in Los Angeles (Playa Vista), owing $271M in unpaid debt

They defaulted on a $250M loan from Morgan Stanley tied to The Bluffs office complex

EJM Equities bought The Bluffs from JPMorgan… pic.twitter.com/0YONEQA1au

— Triple Net Investor (@TripleNetInvest) July 18, 2024

Oops. 

This is very bad…

The tallest building in Birmingham Alabama faces foreclosure

Shipt Tower has been placed in receivership

Wells Fargo, the previous anchor tenant, relocated in 2019 and overall occupancy has plummeted

This looks to be just the start of the troubles for… pic.twitter.com/eHAfjttnuj

— Triple Net Investor (@TripleNetInvest) July 15, 2024

GnS Economics analysts Mate Suto and Tuomas Malinen recently warned:

“Basically, almost every bank in the US is holding some type of CRE loan on their balance sheets. Therefore, it is no surprise that this is an area warranting close observation, especially because the risks posed by CRE exposure spread quite unevenly between large and small banks.”

Fed Powell has a rolling crisis on his hands. And the goal is to save the fireworks for after the election.