Commercial real estate is the next victim of the banking turmoil: Leon Cooperman

  • Leon Cooperman says the commercial real estate sector will be the next market hit by the banking turmoil.
  • Banks will tighten lending standards to focus on liquidity, he told CNBC.
  • The billionaire investor explained why he maintains a “cautious overall view” of the economy.

Leon Cooperman says the pain is ahead for the commercial property market as turmoil in the global banking sector forces banks to tighten lending standards and bolster liquidity.

In an interview with CNBCthe billionaire investor said institutions were forgoing commercial real estate loans and pledges to bolster liquidity.

“I think that will spill over into commercial real estate as banks become more reluctant to lend,” Cooperman said Monday. “That seems to be the scapegoat right now, [but] we’ll survive this.”

The commercial real estate market is operating in a perfect storm of rising interest rates, falling office occupancy rates and, now, less access to credit. There is a huge impending rollover of debt that was initially funded in a low interest rate environment.

This could impact small and medium banks with higher exposure to commercial real estate. Lenders with less than $250 billion in assets account for 80% of commercial real estate loans, according to a March 16 report by Goldman Sachs economists David Mericle and Manuel Abecasis.

Cooperman previously predicted the economy would head into a recession and subsequent stock market bottom thanks to a combination of higher oil prices, quantitative easing, Federal Reserve tightening and a strong US dollar. by the end of 2023.

“We’ve had irresponsible fiscal monetary policies for a long time. We were buying mortgages as house prices were going up 30%,” Cooperman added. “It didn’t make sense, so we realized the problem of inflation. 64% of typical business costs [are from] work and with 1.7 jobs [are] available to anyone looking for a job. It’s not an environment where labor is going to moderate its demands significantly, so I think inflation will be higher than we think.”

The fund manager now says there is still “a bit of trail” for a market bottom, but maintains an “overall cautious view” of the economy.

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