At the end of Q4 2024, commercial real estate continued to exhibit severe weakness, with commercial real estate bonds hitting record distress levels, surpassing the previous records reached in Q3 2024. Commercial real estate bonds are just commercial real estate loans packaged into securities and sold to investors. One category of bonds, commercial mortgage-backed securities (“CMBS”), saw their distress rate increase to 10.6 percent, a fourth consecutive monthly record.
Most notably, in the CMBS category—which comprises approximately $625 billion in outstanding commercial real estate debt—loans on office properties now exhibit a distress rate above 17 percent while apartment loan distress accelerated to 12.5 percent. While loans underlying CMBS bonds—which are generally longer-term and fixed-rate—appear woefully insolvent, another group of bonds comprising short-term floating-rate commercial real estate loans are even worse.
These bridge loans—which are packaged up into CRE-CLO (commercial real estate-collateralized loan obligation) bonds—represent roughly $75 billion of outstanding commercial real estate debt today. At year-end, they were sporting a 13.8 percent distress rate, eclipsing the prior record of 13.1 percent set at the end of Q3 2024.
Worse than It Looks
As bad as the above stats may seem, they do not convey the true extent of malinvestment in commercial real estate, and the consequences thereof. For starters, the analysis leaves out the market for bank lending in commercial real estate—the largest source and the hardest for which to find data—comprising roughly $3 trillion in outstanding loans.
Yes, once again we can see the culprits behind the curtains: the banksters and the Federal Reserve System. They have caused a huge problem with the valuations of commercial real estate due to malinvestments when the cost of money interest was artificially driven down to almost 0%. A lot of loans were taken out that should not have been taken out at that price for the property because the interest rates were so low. Also, the FED was printing money like there was no tomorrow during the COVID plandemic causing our current problems, too. Perhaps it is time to admit there needs to be a separation of money from the state, just like the church and state separation.