Commercial real estate could well be the next big shoe to drop. But even if it is, the systemic repercussions are likely to be small. That’s the message being sent not only by Fed chair Jay Powell on Wednesday but also by New York City Comptroller Brad Lander.
Why it matters: Billions of dollars are tied up in commercial real estate, and much of that wealth could end up getting vaporized.
What they’re saying: Powell downplayed concerns that a fall in commercial real estate values could constitute a systemic risk to the economy as a whole.
- Some banks more exposed to the sector “will experience larger losses,” he said, but broadly the risk is “well-distributed” and the banking system is capable of absorbing the losses.
By the numbers: In terms of New York City property tax revenues, Lander limns four scenarios.
- His baseline forecast shows New York property tax revenues going up over the next three years, rising from $35 billion in 2024 to $37 billion in 2027. Even the “Doomsday” forecast, under which commercial property falls in value by 40% over six years, property taxes still rise in 2027 to $36 billion.
- That’s a shortfall of $1.1 billion compared to the baseline forecast, but even that shortfall represents only 1.4% of city tax revenues. “It is well within the range in which tax revenues can ordinarily vary,” writes Lander.
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Source: www.axios.com
ENB
Sandstone Group
