What happened: The Financial Times reports that San Francisco's commercial real estate market is facing a wave of defaults as many shopping malls and hotels have stopped making payments toward their loans. FT cited a decline in tourism and business travel forced by the pandemic, along with increasing crimes and homelessness, as reasons for a steep decline in the city real estate sector.
What the numbers say: According to Pacer.ai's Office Index for May 2023, foot traffic in San Francisco was down by 58% compared to 2019. This was the largest decline among all major U.S. metro cities. Relevance: Westfield and Brookfield properties have already stopped payments for their $558M loan against the city's largest shopping mall. The defaults could push lenders to offload assets at discounted rates, leading to a drop in property valuation. Many major lenders, such as JPMorgan, Deutsche Bank, Wells Fargo, and Bank of America, could face huge losses if property value plummeted. The city would also potentially see a fall in tax revenue, resulting in budget deficits. |
