CBRE and Wells commercial RE risks, credit to the fool

This on CBRE is higher risk.

Here's What the World's Largest Commercial Real Estate Firm Anticipates In 2023 and Beyond | The Motley Fool.

This is an interesting link by the Fool where the speaker in the video proportions the commercial RE industry and loans. Wells has a concentration of commercial RE loans out there. Wells is not in a strong position. Either he is right in the video and survivable damage happens or he has way understated what will go wrong.

Wells has more room than CBRE to play with.

I think Wells is at extreme risk. The total equity position is roughly $180 billions. That can get overrun in a few failures at this point.

**We also do not know if CBRE and WFC have lent each other money. Would that surprise anyone here if so?


Y’all picked a good time to go remote.

Folks pay attention this is where it all goes wrong.

My old idea was in September this year we get really bad news. This would be it. Of course there can be a delay in when we hear commercial RE fails as an industry.

The bond yields will soar.

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CBRE Group is the biggest but these guys are all intertwined. Most own percentages of different properties. I do not know which will fail first. Or second at that. As a few fail others are left holding the bag.

The banks are at risk.

There are other financial instruments at risk. Bonds options and swaps.

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Alert! This company is at the center of what can go wrong next. It is not just work remotely and the office vacancy rate is high. It is also you furnished your home and now retail sales are in decline. While all of this we could claim is stable the debts in a society have a way of going unpaid.

One of the take aways in the office space and warehouse space rates are declining. Entities are going to lower costs solutions. That compounds the loss of revenue.

Lease signings for big-box facilities–those greater than 1 million square feet — fell 36% in the second quarter over the 2022 period, according to data from real estate services firm CBRE Group Inc. (NYSE: CBRE) published Friday. This triggered an 18% decline in total industrial space leased during the first six months to 373 million square feet, CBRE said.

Year-over-year declines were seen across the entire big-box space. Leasing activity fell 29% for buildings between 300,000 and 700,000 square feet. Leasing dropped 28% for buildings between 700,000 square feet and 1.2 million square feet. Activity dropped 46% for facilities larger than 1.2 million square feet, according to the data.

From the link:

“Still, Ortiz said the market is stronger today than it was in 2019, with current numbers an indication that the market is normalizing after two to three years of pandemic-induced frenzy for large swaths of warehouse space as supply chains buckled, e-commerce demand soared and businesses took on large commitments to hold buffer stock.”


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In other words some debt was taken on to do a buildout in the market (edit during covid) and now the market has significantly receded. The 2019 level is meaningless.