Developers Aim To Make Fenway More Walkable With First Air Rights Projects In Decades

Heading into a new year, the commercial real estate industry finds itself in choppy waters amid fears of a recession, rising inflation, interest rate hikes and projects that have been put on pause as market players await a course correction.

Those responding to Bisnow’s 2023 predictions survey candidly said they are struggling to navigate more than this time last year, despite positive sentiments for certain parts of the country and several asset classes.

And they expect the turbulence to continue, at least in the short term, with an overwhelming majority reporting they think a recession is happening or will happen next year.

Some said the industry will suffer more than the general economy.

“Let me be specific: I think a commercial real estate recession is coming,” said Colliers Houston President Patrick Duffy, adding that that might not hold true for the economy at large given low unemployment and other indicators pointing away from an overall recession.

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It has been a brutal year for publicly traded commercial real estate owners on Wall Street, so much so that an ignominious milestone was reached for the first time in more than two decades.

No companies have filed to become a public real estate investment trust in 2022, the first time that has happened since 2001, a spokesperson for REIT industry group Nareit confirmed to Bisnow.

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The future of The Trump Organization is up in the air following its multiple tax fraud convictions last week, but an aptly named clause present in most commercial property loans could force the company to pay out hundreds of millions in debt or risk immediate foreclosure of some of its portfolio.

“Bad boy” carve-outs became standard in the vast majority of loan documents following the Great Financial Crisis and are primarily intended to disincentivize unsavory activity.

They can be triggered via a crime like fraud, after which a lender could claim a loan’s borrower and guarantor may be immediately liable for its entire outstanding balance. In other cases, the parties may only be responsible for covering losses suffered by the lender as a result of the bad act.

Legal experts said it is unclear whether the Trump Organization’s property loans are subject to the carve-out, and opinions vary on whether criminal income tax fraud translates to lender damages.

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Investors are lining up to take their money out of nontraded REITs after pouring in tens of billions in recent years, which allowed fund managers like Blackstone and Starwood to dominate the commercial real estate market with huge portfolio acquisitions.

Now these types of funds, which didn’t exist during the Great Financial Crisis, are in uncharted waters.

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