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Is Commercial Real Estate The Next ‘Big Short?’

Malls, and other retailers have been struggling for years to maintain their real estate due to the increase in online shopping. This comes as no surprise to industry experts, however, it may take a drastic toll on the economy. In 2016, roughly $3.5 billion in retail loans were liquidated, which proves that losses on mall loans have been significantly higher than other areas of real estate.

Below is a list of charts which show the changes that have taken place over time. According to the following data proves that many commercial businesses are unfortunately failing.

#1. Department store sales have collapsed, and retailers continue to close.


#2. Store closings are the highest they’ve been since 2008. Without major retailers residing in commercial buildings, there’s a high chance the commercial space will be forced to close its doors because they can’t afford the bills.

#3. As a result of increased vacancies, commercial real estate prices have also been on the rise.

Overall, this essentially means that when malls, and other commercial properties fail, the lenders are projecting massive losses. For Example, Hudson Valley Mall in New York recently faced liquidation, and investors lost a total of $42 million, which is catastrophic.

Author: Tara Doherty