Despite Best Efforts, a Surge of Distressed Assets Is Coming to CRE

A flood of distressed assets is headed for the market. There has been some debate about the future market for distressed assets as a result of the pandemic. Some experts have argued that better underwriting will help property owners hold on to properties through the pandemic. However, as the public health crisis wears on, property owners are left with few options to cope with income loss. The dynamic has promised an increase in distressed assets.

“If you look at assets that were impacted by COVID, like hospitality, which has been devastated, retail and office, there is true distress in the commercial real estate sector as more and more time passes where there is impact to the economy,” Pat Jackson, CEO of Sabal Capital Partners, tells GlobeSt.com. Securitized loans, for example, don’t have the option to be extended after a certain period of time and they will go into special servicing. It will start the drumbeat of foreclosures.”