Jul 23, 2017

E-commerce's next victim: commercial real estate

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The shift to on-line shopping is now striking at the underlying value of malls, and commercial real estate as a whole.

  • About $120 billion in U.S. commercial mortgages mature this year: Borrowers went delinquent on about $2.4 billion of it in June alone, according to Trepp, a real estate data provider, quoted by the WSJ.
  • It was the largest rise in delinquencies in six years, according to Fitch, the rating agency. Fitch's silver lining: it's not as bad as it expected at the beginning of the year.
  • Still, more defaults are coming: The credit industry expects delinquencies on such debt to escalate over the coming year, according to a new poll of portfolio managers, and to spread globally.
  • Look at this number: In the FT, Blackstone executive Nadeem Meghji said the value of regional malls in smaller cities may be down 40% on average over the last two years.
  • We are only seven months into the year: Retailers have announced plans to close 76 million square feet of store space already this year, according to CoStar, a data provider, almost as much as that announced in the whole of 2016.

"Second-order effects": Joe Brusuelas, chief economist at RSM, an auditing firm, tells Axios that the plunge in valuations is likely to spread to office buildings and other commercial real estate. That will then affect surrounding communities. "They won't have those property taxes," he said.

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Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 7 a.m. ET: 6,289,259 — Total deaths: 375,987 — Total recoveries — 2,706,820Map.
  2. U.S.: Total confirmed cases as of 7 a.m. ET: 1,811,277 — Total deaths: 105,147 — Total recoveries: 458,231 — Total tested: 17,340,682Map.
  3. Public health: Nearly 26,000 coronavirus deaths in nursing homes have been reported to federal health officials —Coronavirus looms over George Floyd protests across the country.
  4. Federal government: Trump lashes out at governors, calls for National Guard to "dominate" streets.
  5. World: Former FDA commissioner says "this is not the time" to cut ties with WHO.
  6. 🎧 Podcast: The virus didn't go away.

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President Trump walking back to the White House. Photo: Brendan Smialowski/AFP via Getty Images

Moments before President Trump began his Rose Garden address, a mass of law enforcement suddenly marched forward in Lafayette Park, across Pennsylvania Avenue from the White House.

Why it matters: It was a jarring scene as police in the nation's capital forcefully cleared young men and women gathered legally in a public park on a sunny evening, all of it on live television.

Trump goes full law-and-order

Photo: Tom Brenner/Reuters

President Trump's final decision to speak in the Rose Garden last evening as protests raged outside the gate was made only hours before, reflecting chaos on both sides of the fence.

Why it matters: Trump’s ultimate remarks fell where his instincts always were: blunt, brutal law and order, with extreme demonstrations of militarized “strength” and blustery threats.