Preparing to capitalize on the next market collapse

[Scott E.]

Every day I spend some time in the morning getting up to speed on the latest state of the real estate market by reading various news outlets, listening to economists, looking at data around inflation/inventory/rates, etc. There are 2 things that I've gathered from the last couple of months that everybody seems to agree on:

1. Nobody knows for sure where the residential real estate market is headed.

2. Everybody seems to agree that there is serious pain ahead in the commercial real estate market.

As far as I can tell, the challenges in commercial real estate are centered around a few factors:

 -Many loans coming to due in 2023 (about $270 billion worth), meaning owners will be forced to refinance or sell this year.

 -Vacancy rates are high (specifically in office and retail, also depending on the region). AND interest rates are high. Meaning that if an owner is forced to refinance when their loan matures, they will get stuck with a much higher payment on a property generating much less income due to vacancies.

 -Vacancy rates in office are already showing some serious blows to office valuations. It may be an anomaly but just last week it was reported that an office building in San Francisco worth $300,000,000 in 2019 is expected to sell for $60,000,000 today. Ouch. Link

 -The vacant office space is causing a ripple effect. If a 100,000 square foot office building is sitting 35% vacant in the heart of Manhattan or San Francisco, that is not just a problem for the office building owner. The surrounding retail shops who depend on those office employees as customers are hurting as well. And if they don't have as many customers, they are less likely to be able to afford their rent. Which is not good for the owners of those retail buildings either.

-According to various reports, real estate accounts for ~25% of US banks books and as much as 65% for smaller banks. If commercial real estate owners start walking away from their buildings, these smaller banks could also be in big trouble.

As of now they say most debt on commercial real estate is being paid as agreed. But this feels like a "calm before the storm" to me.

Would love to hear the perspective of those who are wiser than me on what the future holds in commercial real estate. I can't help but think that we are about to experience a lot of pain and a lot of opportunity in commercial real estate.