Real estate billionaire Tom Barrack, the chairman and chief executive officer of Colony Capital, warned recently that the U.S. commercial real estate mortgage market is on the brink of collapse due to a predicted chain reaction of margin calls, mass foreclosures, evictions and bank failures resulting from the coronavirus pandemic.
“Loan repayment demands are likely to escalate on a systemic level, triggering a domino effect of borrower defaults that will swiftly and severely impact the broad range of stakeholders in the entire real estate market, including property and home owners, landlords, developers, hotel operators and their respective tenants and employees,” he wrote.
The longtime friend of President Donald Trump surmises that the impact could dwarf that of the Great Depression.
Indeed, the commercial property market is under severe strain domestically and abroad due to forced shutdowns of retail and hospitality businesses during the COVID-19 outbreak. The looming crisis in commercial real estate could eventually cause the Federal Reserve to relax some regulations, allow more forbearance on loans, and buy distressed assets directly by restarting the Troubled Asset Relief Program.