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The commercial real estate market is showing some cracks

Good morning, team. I’m Phil Rosen. Thanks to Succession, the last couple of Sundays have been tough to beat — but Wednesdays are no slouch either. 

Of all the places to be on a hump day evening, you can bank on me watching the new episode of The Mandalorian

But before we get too intergalactic, this morning we’re stopping off in the commercial real estate space

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1. In the wake of March’s bank tumult, commercial real estate has frequently been noted as the next domino to fall — and one corner of the market is already showing signs of stress

Apartment building sales last quarter posted their steepest quarterly decline since the Great Financial Crisis, according to data from CoStar cited Tuesday by the Wall Street Journal. 

The data hints at what a chorus of commentators have been warning against for weeks: Climbing interest rates and elevated bank lending standards are set to squeeze the market for commercial properties. 

A few things to remember: 

  • Higher interest rates have made it more expensive for both American households and large commercial real estate owners to buy or refinance property.
  • Last month’s bank failures and the subsequent deposit flight is pushing banks to tighten up their lending standards.
  • Small and medium-sized banks hold 80% of US commercial real estate debt outstanding.

Essentially, higher rates are making it more expensive for borrowers, and March’s chaos has made banks increasingly hesitant to lend as deposits move into money market funds and other higher yielding safe havens. 

Another place of weakness in the market is apartment rents, which according to Moody’s Analytics, declined in most US markets in the first three months of 2023 as vacancies for rental apartments saw their biggest jump in the two years.

“‘Pandemic fever’ once fueled by discounted rental prices and migration has gradually subdued as rent burden grew while economic growth and household formation slowed,” the Moody’s analysts wrote. 

“Multifamily demand has softened notably over the past few quarters with net absorption even teasing slightly below zero in the first quarter of 2023.”

These are the five cities that saw the steepest rent declines to start the year.

What are the biggest risks, in your view, facing the commercial real estate market for the second quarter of 2023? Tweet me (@philrosenn) or email me ( to let me know. 

In other news:

China yuanChina’s yuan has tumbled in recent weeks.

Bloomberg Creative/Getty Images

2. US stock futures fall early Wednesday, as investors digest the latest job openings report. Meanwhile, hawkish messages from New Zealand and Australian central banks are fueling concerns about global inflation. Here are the latest market moves.

3. On the docket: Royal Bank of Canada, Hewlett Packard, and Chase Corp, all reporting.

4. Zillow’s chief economist said the party is over for short-term real-estate investing tactics. Strategies like house-flipping aren’t going to work anymore, Skylar Olsen said, and the early-pandemic buying landscape isn’t coming back. Now, investors’ best bet are long-term approaches designed to generate cash flow.

5. Jamie Dimon, the CEO of JPMorgan, published his annual letter to shareholders on Tuesday. The 67-year-old Wall Street icon said the banking turmoil wasn’t over and broke down the geopolitical risks he sees in the years ahead. Here are Dimon’s eight most fascinating takes from the letter.

6. Short sellers made $848 million betting against First Republic Bank in March. The bearish bets on the troubled financial firm were the most profitable short trade last month, as investors bet that the company would succumb to the same fate as Silicon Valley Bank.

7. China’s yuan just surpassed the US dollar as the most-traded currency in Russia. Bloomberg data illustrates that the yuan topped the greenback in both of the last two months. The trend comes as Moscow and Beijing continue to deepen political and economic ties as the war in Ukraine drags into its second year.

8. Three leading Wall Street strategists revealed the overlooked reason why stocks are on shaky ground now. “When you look at the surface, what you’re really seeing is some cracks in the foundation,” one strategy chief said in speaking of a potential sell-off. Here’s how to invest with a downturn looming.

9. This research analyst shared 12 crypto projects supporting AI development as mega-cloud giants like Amazon dominate the sector. The demand for these tokens could increase as developers use their blockchains to train and run AI models. Get the full details.

AMC entertainment share price on April 5, 2023

Markets Insider

10. AMC stock crashed more than 20% on Tuesday. The theater chain settled a lawsuit that opened the door for the company to convert APE preferred stock into common shares. AMC can also now move forward with a potential reverse-stock split and a capital raise — proposals that shareholders previously rejected.

Curated by Phil Rosen in New York. Feedback or tips? Tweet @philrosenn or email

Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.

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