Why low rates are raising questions about the next commercial real estate unwind

Rents may be too damn high for apartment dwellers, but they look pretty weak for the rest of the U.S. commercial property market as prices skyrocket.That might not be a problem now, particularly as the Federal Reserve reaffirms its plan to keep rates low, its balance sheet available and credit spigots open.Yet analysts at BCA Research see potential trouble when the next downturn comes for office buildings, shopping centers and industrial properties that were purchased in the past decade at soaring prices.This chart shows sagging rents at most U.S. commercial property types since the 2007-’09 recession, even as property prices have eclipsed their prior peak. “With the exception of multifamily residential real estate, American real rents have fallen, revealing that low rates have propelled commercial properties’ price appreciation over the past decade,” wrote BCA Research strategists Ryan Swift and Doug Peta, in a client note Wednesday.

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