'An Anvil, Not A Shoe': Elon Musk Warns Of A Crushing Blow To Commercial Real Es...
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'An Anvil, Not A Shoe': Elon Musk Warns Of A Crushing Blow To Commercial Real Estate — Here Are The Companies Set To Benefit From The Market Collapse
from home challenges,
From artificial intelligence to extraterrestrial life, Tesla Inc. CEO Elon Musk discussed a wide range of topics during his Fox News interview with Tucker Carlson. He also touched on commercial real estate — and the message is pretty dire.
“We really haven’t seen the commercial real estate shoe drop. That’s more like an anvil, not a shoe,” Musk said. “So the stuff we’ve seen thus far actually hasn’t even – it’s only slightly real estate portfolio degradation. But that will become a very serious thing later this year, in my view.”
He pointed out that the work-from-home trend has substantially reduced the use of office buildings around the world. And that does not bode well for commercial real estate.
“Almost all cities at this point have record vacancies of commercial real estate,” Musk explained.
These vacancies could have serious consequences — and even banks could be in trouble.
“Commercial real estate used to be something that was a Grade A asset, that if a bank had commercial real estate holdings those would be considered the highest security ... some of the safest assets you could have,” he said.
“Now, that is not the case anymore. One company after another is canceling their leases or not renewing their leases. Or, if they go bankrupt, there’s nothing for the bank who owns that real estate to go after, because they were a previously strong company now dead. What do you go after at that point?”
It’s a dire picture. Bank failures have already been in the headlines. Should they suffer further blows from the anticipated downfall of commercial real estate, the entire system could be at risk.
The Proverbial Ring Of Fire
Musk is not the only one who sees challenges for the segment on the horizon. Real estate industry veteran Benjamin Miller also predicts impending financial turbulence.
Miller is the co-founder and CEO of the real estate crowdfunding platform Fundrise. In the latest investor update, he wrote, “Before the next upswing begins, markets (along with all investors) must first pass through this final stage of financial turmoil, a crucible reforging of markets — akin to the proverbial ring of fire — where nerves will be tested and the ill-prepared left wanting.”
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