At this moment, we are in the midst of a meltdown that I believe will eventually be regarded as the worst commercial real estate collapse that America has ever seen.

In fact, we just learned that the number of commercial real estate foreclosures in March was 117 percent higher than it was during the same month in 2023…

The commercial real estate market is starting to buckle under the weight of higher interest rates and remote work.

There were 625 commercial real estate foreclosures in March, up 6% from February and 117% from the same time last year, according to a new report published by real estate data provider ATTOM.

Things are particularly bad on the west coast.

The struggles of San Francisco and Los Angeles are well documented, and so it is not much of a surprise that last month commercial real estate foreclosures in the state of California were up 405 percent compared to the same month last year…

California had the highest number of commercial foreclosures in March, with 187 properties. While that marked an 8% decrease from the previous month, it is a stunning 405% jump from the previous year.

“California began experiencing a notable rise in commercial foreclosures in November 2023, surpassing 100 cases and continuing to escalate thereafter,” the report said.

But it isn’t just the west coast that is facing a nightmare.

This is what St. Louis looked like at the time of the World Fair in 1904…

I know this may be hard to believe, but at that time it was a glorious city. But now it looks like a hellhole. Recently, a vacant office building in the downtown area sold for 98 percent less than it did in 2006…

A vacant office building in downtown St. Louis just sold for $3.6 million — a nearly 98% discount from its 2006 sales price, signaling a concerning course for the Midwestern city’s downtown area.

The former One AT&T Center, which at 44 stories is the third-tallest building in St. Louis, sold for $205 million in 2006 and recently sold for $3.6 million to the Goldman Group, a real-estate investment firm, according to CoStar News.

Very few people want to live or work in downtown St. Louis these days, because it has become “a very dangerous place”…

The Wall Street Journal on Tuesday published a story on the “real estate nightmare” and detailed stories of boarded-up properties and occasional raids by police and firefighters searching for squatters and missing people.

“It’s a very dangerous place,” St. Louis Fire Department Chief Dennis Jenkerson told the paper.

As things continue to get worse, more people want to leave.

At this point, just about everyone acknowledges that St. Louis is trapped in an “urban doom loop”…

The cycle is often called the “urban doom loop,” which the Atlantic describes as the cycle of people moving away from city as things get worse, then things getting worse because more people moved away.

Business Insider’s Eliza Relman described the doom loop afflicting Midwestern cities: “Commercial property taxes make up a large chunk of many city budgets, so as office vacancies rise, the decreased revenue could force leaders to curtail municipal services or make cuts to key programs. Declining services and quality of life in turn pushes residents out, leading to a self-reinforcing exodus. Without serious changes, these midsize cities in the middle of the country could be quietly sliding into oblivion.”

Honestly, I don’t know why anyone would still want to be in St. Louis.

Violence is a constant threat, and it has experienced the largest decline in foot traffic of any major U.S. city…

Locals said they are often depressed and scared by the sight of empty shops and restaurants, according to the WSJ. Sidewalks are left barren as fewer people choose to commute into the downtown area, and recently installed signs urge visitors to “park in well-lit areas.”

According to the University of Toronto’s School of Cities, the business district of St. Louis experienced the greatest drop in foot traffic of 66 major U.S. cities between the start of the pandemic in 2020 and the summer of 2023.

Sadly, this is the road that almost all of our major cities are now going down.

New York was once one of the finest cities on the entire planet, but now the streets are littered with open air markets that are selling stolen goods, drugs and sex services…

Roosevelt Avenue near 91st Street is littered daily with migrant vendors hawking goods they ripped off from shopkeepers just steps away, while prostitutes proposition passersby at all hours — and frustrated merchants and residents say they’re helpless to do anything about it.

“It’s relentless,” said Milton Reyes, who manages Mi Farmacia pharmacy on the avenue. “You should see it on Saturdays. It’s so heavy, you can’t even step onto the sidewalk. There are a lot of doctors’ offices right around here and my customers don’t even want to get dropped off.

What a nightmare.

The police do patrol the streets, but as soon as they are out of sight the open air markets resume business as usual…

In Jackson Heights, the hookers now share the landscape with shoplifting migrants who mob and ransack local retailers, then brazenly sell their stolen merchandise for 20% or 30% less just steps from the stores, retailers said.

“They are stealing,” Francisco O’Porta, a security guard at Lot-Less, told The Post. “They rip it out of the box, but it’s ours. You can see. It is brand new, but they are selling it as used. It’s our stuff.

“They have been training people,” said O’Porta, 55, of Long Island City. “They have lookouts, you know, people to yell so they can pick up and leave when police come. I am catching a lot, a lot of them stealing. I caught 20 people last week. Twenty in one week. They are hurting business.”

If New York authorities cannot get crime under control, the mass exodus out of the Big Apple will get even worse.

According to the video that I have posted below, the city now has “a $4.4 billion shoplifting economy”…

This is what societal collapse looks like.

And you definitely do not want to be in an environment like that when things really start hitting the fan.

The moral character of our country really matters.

Sadly, it has been declining for decades, and now we have a complete and utter horror show on our hands.

Sound off about this article on the Economic Collapse Substack.

Michael’s new book entitled “Chaos” is available in paperback and for the Kindle on Amazon.com, and you can check out his new Substack newsletter right here.

Overall 30 day+ delinquencies on commercial mortgage-backed securities (CMBS), meaning the number of borrowers for commercial properties that failed to make a required payment in at least the last 30 days, increased from 2.96% from one year ago to 4.63% as of October, according to a report from market research group Trepp. The delinquencies are indicative of danger in the commercial real estate sector, as they indicate that many of those could become bankruptcies, threatening an already hurting banking industry and exacerbating any economic downturn, according to experts who spoke to the DCNF.

“Commercial real estate is in deep trouble and could constitute a major risk to the banking system and the recovery,” Desmond Lachman, a senior fellow at the American Enterprise Institute, told the DCNF. “In fact, I would characterize the situation as a slow-moving train wreck. The underlying problem is that occupancy rates have slumped post-Covid since many workers are now working at least part of the time from home.”

Vacancy rates for offices have continued to trend up since the COVID-19 pandemic, which forced many businesses to adopt remote work to continue operations — a change many workers have been reluctant to let go of, according to a report from Cushman & Wakefield. In 2019, the vacancy rate hovered around 13% and has increased to around 20% as of the third quarter of 2023.

“The pandemic was an aggravating force that gave the shift from brick-and-mortar to laptop purchasing critical mass 20 years after it began,” Peter Earle, an economist at the American Institute for Economic Research, told the DCNF. “People, even (and especially) those who were suspicious of internet retail or liked the in-person shopping experience, were forced to move their consumption online during lockdowns and under stay-at-home orders. Many of them liked it, came to trust it, and now see little reason to go back to physical establishments.”

Delinquency rates for offices have seen the largest jump among commercial real estate, rising from 1.75% on 30 day+ delinquencies last year to 5.75% as of October 2023, according to Trepp. Industrial property delinquencies increased from 0.43% to 2.56%, and multifamily property delinquencies increased from 0.85% to 2.64% over that same time frame.

Retail delinquencies over the past year have managed to remain mostly stable as they are not hampered by factors like an increasing number of remote workers, according to Trepp. Despite being stable, delinquency rates for retail measured 6.55% in October 2023, lower than one year ago when it was 6.66%, but still greater than any other category in commercial real estate.

“To the extent that a commercial real estate slump creates job losses among staffers and maintenance people, a recession will be exacerbated by bankruptcies or liquidations,” Earle told the DCNF. “The longer-term effects, which would include canceling planned construction or freezing existing projects, would impact the building and materials industries as well. Further negative impacts could materialize if regional banks, which have lent substantial amounts to commercial real estate builders and owners over the past decade or two, find themselves mired in rising loan defaults.”

U.S. banks outside of the top 25 in assets hold around 37.6% of all loans but hold an astonishing 67.2% of all commercial real estate loans as of March, according to Axios. As of the last quarter of 2022, 40% of loan officers were tightening their lending standards in the commercial real estate sector as the industry becomes a riskier bet.

Small and medium-sized banks have been the cause of concern for some following a banking crisis at the beginning of 2023. Silicon Valley Bank collapsed after a bank run in March, with Signature Bank and First Republic Bank following suit, leaving many regional banks to struggle as depositors fled to larger banks that they believed would be a safer bet.

WeWork's $47 billion collapse could be the straw that breaks regional banks.

It could put nearly 600 commercial leases on the block, sticking the landlords — and their banks — with the bill.

Commercial real estate accounts for 30% of regional bank loans — roughly $300 billion.… pic.twitter.com/jxXlDQp6qK

— Peter St Onge, Ph.D. (@profstonge) November 17, 2023

“All of this is particularly bad news for the regional banks since as much as 18% of loans are made to this sector,” Lachman told the DCNF. “If the regional banks have to restrict lending because they are having large loan losses, this could spell trouble for the small and mid-sized companies that are hugely reliant on the regional banks for their credit. And those small and mid-sized companies account for close to half of overall employment.”

The Federal Reserve has raised its federal funds rate to a range of 5.25% and 5.50%, the highest rate in 22 years, after a series of 11 hikes that began in March 2022 in an effort to combat inflation. Inflation peaked at 9.1% in June 2022 and has since decelerated to 3.2% in October, far higher than the Fed’s 2% target.

Amid fears about the struggling industry, lending for commercial and multifamily mortgages dropped 49% year-over-year in the third quarter of 2023, according to Market Insider. The slowdown could be increasingly felt by the broader economy over the next few years, with around $1.5 trillion in debt needing to be paid back as the possibility for defaults increases.

“I think that the commercial real estate sector is a major risk to the economic recovery and that the Fed and the markets do not seem to be paying sufficient attention to this matter,” Lachman told the DCNF.

All content created by the Daily Caller News Foundation, an independent and nonpartisan newswire service, is available without charge to any legitimate news publisher that can provide a large audience. All republished articles must include our logo, our reporter’s byline and their DCNF affiliation. For any questions about our guidelines or partnering with us, please contact [email protected].

Lenders issued foreclosure notices for 62 high-risk loans in the commercial real estate sector for this year ending in October, double last year’s total and possibly the highest number ever, according to a WSJ analysis. Many of those foreclosures are from mezzanine loans, or high-risk property loans that allow for a shorter time to foreclosure and have higher interest rates, with the shorter time frame giving a more immediate pulse on the health of the sector and forecasting a possible wave of foreclosures in the future on more traditional loans.

“A lot of borrowers have basically said, ‘I can’t hold this asset any longer; I can’t keep putting money in,’” Terri Adler, managing partner at the law firm Adler & Stachenfeld, told the WSJ. “And the lenders have said, ‘OK, we’ll take it back.’”

Commercial real estate foreclosures, while still presently low, are a lagging indicator of the sector’s health, as there can be a gap of a few months to years between a default and a foreclosure on more traditional loans, according to the WSJ. The total dollar amount for mezzanine loan foreclosures, despite the increase, is not known as the loan type does not appear on property records due to its opaque nature.

'Delinquent commercial real estate loans at US banks have hit their highest level in a decade, as higher interest rates, an uncertain economy and the rise of remote working pile pressure on building owners.' https://t.co/DXNOUAOJU3 pic.twitter.com/YtpawnQLQl

— Jesse Felder (@jessefelder) November 9, 2023

Regulators have forced bigger banks to be more cautious since the 2008 financial crisis, where a bubble in the real estate market burst after banks issued an exceptional number of risky loans, leading to the recent rise in mezzanine loans, which avoid this regulation to fill that demand for riskier loans, according to the WSJ. Smaller banks, debt funds or nonbank lenders fill this gap with mezzanine loans that entice lenders with interest rates often above 10%.

Mortgage rates reached a recent peak near the end of October at 7.9%, the highest point since September 2000. Residential home affordability has also suffered, with the average American only being able to afford a 30-year mortgage on a $356,273 house as opposed to that same family being able to afford a $737,392 house in December 2020.

Interest rates across all forms of debt are facing upward pressure from the Federal Reserve’s federal funds rate hikes. The rate has been put in a range of 5.25% and 5.50%, a 22-year high, following a series of 11 hikes in an effort to combat inflation, which peaked at 9.1% in June 2022.

Leave your thoughts on the Economic Collapse Substack.

All content created by the Daily Caller News Foundation, an independent and nonpartisan newswire service, is available without charge to any legitimate news publisher that can provide a large audience. All republished articles must include our logo, our reporter’s byline and their DCNF affiliation. For any questions about our guidelines or partnering with us, please contact [email protected].