Doom Loop
Are American Cities in trouble?
I have been working with Commercial Real Estate customers for about 5 years now. I don’t need to tell you what happened in March 2020. What I can tell you is their is a slow-burn of this industry self-imploding.
The Doom Loop is a phrase to describe the current state of the CRE market all across the U.S. in major cities. The Doom Loop means when one bad thing occurs this sparks other bad things to occur and the cycle continues. Or is it just a mindset?
In the context of what’s happening with the CRE market right now if large office buildings in downtown and metro areas start to fail that will create less foot traffic for small business during the working hours (bakeries, restaurants, laundromats, bars, hotels, etc.). In other words, it’s a Doom Loop. This makes perfect sense and is already happening. The business district of S.F. has been decimated by this coupled with lax laws on shoplifting and the like (you can steal up to $950.00 in merchandise and it’s considered a misdemeanor). Not to mention the open-air drug markets and homelessness both of which have become untenable.
One S.F. city official even brought attention to the issue by posting a “Doom Loop” Tour for $30.00 to show people the “Seedier” side and downtown squalor. The tour sold out. But not surprisingly the city official canceled the tour last minute and resigned. Self admittedly this was all satire Alex Ludlum said. He held the office of Committee Investment and Infrastructure.
https://www.nbcbayarea.com/news/local/san-francisco/san-francisco-doom-loom-walking-tour/3305932/
Since the pandemic downtowns have changed. I live in Atlanta and it has certainly felt the wrath. ATL is a CRE Hub.
ATL’s Buckhead has historically been one of if not the most lucrative and expensive areas of the city (old and new $). The very first prominent high rise office space to be built in the financial district, Tower Place 100, has defaulted on a $213 Million dollar loan back in July 2023. The loan matured and the owners couldn’t pony up the cash. Vacancies are shooting up and property values are plummeting which will drag the tax revenue down with it.
https://finance.yahoo.com/news/billionaire-barry-sternlichts-firm-just-162834856.html
To zoom out on this, bank’s total exposure nationwide is $3.6 Trillion. $1.5 Trillion in Debt will be maturing by end of 2025. With interest rates going up re-financing is significantly burdensome.
I smell a federal bail-out coming.