It’s starting at the top, and it’s going to trickle down. Of course, I’m talking about the impending problems in commercial real estate. Unlike the last real estate debacle, which was led by massive overborrowing and overconstruction in single-family and for-sale condo properties, the stage for this one was set by massive, massive overbuilding of for-rent, multifamily property.Â
This Bloomberg story shows how Brooklyn rents are now falling on a year-over-year basis for the first time in ages. A key catalyst: The number of available property listings has soared 30% to the highest since brokerage Douglas Elliman Real Estate began tracking in November 2008. But due to the “pipeline” effect – previously planned, under construction, and soon-to-be available-to-lease property – a whopping 6,635 brand new apartments will hit the market in the remainder of 2016. That’ll be followed by another 7,642 in 2017. Meanwhile, in Manhattan, July’s vacancy rate hit a nine-year high.Â
Keep an eye on this. Construction was a key prop for the U.S. economy during the economic recovery. But my work suggests that industry is in for tougher times in the quarters ahead.
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