Tracing the Commercial Real Estate Boom and Bust
Business Insider has an interesting chronology posted on its site tracing the rise and fall of commercial real estate that’s left us in a situation today in which we’re looking at a wave of defaults making its way through the industry.
I’ve embedded the presentation below. It’s done in a slightly annoying way–forcing you to click through 32 slides to read the whole narrative so you have to read it one paragraph at a time. The title itself is also misleading. The commercial real estate boom was not created by a “government bailout.” I assume that John Carney is referring to the Resolution Trust Corp. that was used to unwind the debts from failed savings and loans when he’s making that assertion. I do not think the RTC–which contributed to the creation of commercial mortgage-backed securities–is the sole source of the extreme rise in values we saw between 2000 and 2007. There are a variety of factors that this piece touches on that had nothing to do with government intervention. It’s hard to draw a connection between the RTC and the rise of REITs, for instance, which were a big part of the commercial real estate boom. Moreover, small and regional banks have nothing at all to do with CMBS. They are not conduit lenders.
Regardless, the presentation is worth going through. And I’m curious as to what readers in the commercial real estate space think of the narrative Carney is laying out.
