The Biden administration, the media, Democrats, and Republicans are all either willfully ignorant or blithely unaware of the looming economic crisis that’s about to hit. Inflation is part of the problem, but we’re going beyond job creation reports and the fallout from Silicon Valley Bank. It’s a crisis that could cause all the dominoes to fall, and it doesn’t help that we have a president who gets outright exhausted after a few days of work. A looming real estate crisis threatens to nuke the whole system. The bleeding has already begun, and it could take decades for some “superstar cities” to recover, while some will tragically remain lost in the wilderness.
Office space and commercial real estate have become the Achilles heel of the economy, made even more vulnerable thanks to the COVID pandemic. Working from home exposed some companies to the benefits of not having an office, leading to cost-saving decisions to cut overhead costs. J.P. Morgan thought its office culture would return to normal once the COVID Nazis allowed us to go outside. Instead, he’s cutting his New York footprint.
In June, Dror Poleg had a lengthy piece in The Atlantic that gave an apocalyptic economic projection, breaking down this pending crisis where banks and cities are about to endure a brutal blow to their balance sheets. With interest rates rising, landlords big and small are looking to turn their keys over to the bank in strategic foreclosure. Poleg, a financial investor and author who concentrates on technology’s impact on urban economies, even quotes John Maynard Keynes regarding this trend: if you owe the bank $1,000, you’re at their mercy, but if you owe them $1 million, the roles are reversed.
You see that in San Francisco, where downtown property values have plummeted by hundreds of millions of dollars. The owners of the Westfield San Francisco Centre shopping center gave their vote of confidence regarding a potential Bay Area comeback: they left. Seeing a $558 million mortgage on their books, they opted to give up the property to the bank. And they’re not the only ones; there’s a retail exodus occurring in the city.
h/t Coastie Patriot
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