"And while I haven't really been specific about what the catalyst could be that pushes us over the line, certainly a couple of new examples presented themselves this week.First, there was the bankruptcy of WeWork. The company had previously made its founder a billionaire and was once valued at $47 billion.It sought Chapter 11 bankruptcy protection in New Jersey, announcing deals with most of its secured creditors and plans to cut leases that aren't central to its operations. The proceedings will affect its U.S. and Canadian locations. In its preliminary filing, the office-sharing firm disclosed liabilities of approximately $18.65 billion, with assets tallying $15.06 billion.This is one of the most stunning reversals and evaporation of “value” (pause for laughter) in recent memory. How much of a soft landing can our economy be in for when one solitary company has been responsible for the evaporation of nearly $50 billion in perceived valuation over the course of just a couple of years?.....
For those unfamiliar with why commercial real estate might be the next bubble to pop, ...to put it simply, coming out of COVID, commercial office space is in less demand than it has ever been at any time over the last half-century. This demand evaporated at a point where the consumer, corporations, municipalities, and just about everybody tied to interest rates are starting to tighten their belts.
...Little signs have been bubbling under the surface. Have you noticed? For example, how about the American Dream Mall in New Jersey that features an indoor theme park, water park, ski slope, & high-end luxury stores? (Euphoria, anyone?) It experienced a fourfold increase in losses in 2022, reaching $245 million. Challenges in drawing tenants and customers, coupled with a significant debt burden, have troubled the “America, f* yeah!” of malls, which started 2023 by missing debt payments."
