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If you’re a commercial property giant, Shark Tank star Barbara Corcoran has some bad news for you: the market is going to get much worse before it gets any better.
In fact, it’s going to be a “bloodbath.”
Corcoran echoed the sentiments of Tesla CEO and Twitter owner, Elon Musk, who earlier this week tweeted: “Commercial real estate is melting down fast.”
Speaking to FOX Business’ The Claman Countdown this week, Corcoran—who sold her New York real estate brokerage for $66 million in 2001—said there isn’t enough confidence in the commercial property market post-pandemic.
Despite mandates from big businesses like Google, Amazon and most recently Meta, swathes of office blocks across the U.S. are still lying partially empty.
According to data from security provider Kastle the average occupancy of offices across America is at just under 50%—with the New York metropolitan area seeing some of the lowest rates of tenancy.
“No one really believes it’s going to turn the corner,” Corcoran said. “People are staying home. Our best office buildings in midtown Manhattan are 50% occupied, and in most major cities or in secondary cities, we have a 20% vacancy rate. No one wants to take that chance.”
She added that with turbulent economic times ahead she expects to see more businesses defaulting on their loans or mortgages—an issue which will trickle back to regional banks.
Corcoran’s theory is in line with the data: UBS said in April it expects to see more defaults on real estate loans as a result of an expected credit crunch.
“I don’t see that turning around,” the Shark Tank star said. “I think it’s going to be a bit of a bloodbath before it gets better.”
It’s a crisis Elon Musk has sounded the alarm on multiple times—his warning earlier this week, in response to Craft Ventures founder David Sacks highlighting the level of debt about to mature in the sector, was just the latest.
In March the SpaceX founder responded to a tweet about real estate debt with: “This is by far the most serious looming issue. Mortgages too.”
Housing market peak or pit?
Corcoran and Musk seem to be divided on the residential market however, with the former expecting a rebound and soaring house prices in the future and the latter predicting a meltdown.
“Sellers don’t want to move from their apartment, or their home, because they don’t want to take on higher interest rates,” the Shark—who nearly lost her spot on the ABC show—explained. “The people who are going out there and buying are finding they’re overbuilding. They’re having a hard time getting their hands on the house.
“And right now, what everybody’s afraid of is the high-interest rates. But the minute those interest rates come down, all hell is going to break loose and prices are going to go through the roof.”
She highlighted that there is “no relationship” between the commercial and residential sectors, adding she expects to see house prices jump 20% if rates go down by as little as two points.
Musk on the other hand sees home values tanking—though didn’t reveal by how much he sees them collapsing, or why he holds this view.
He also got pushback on the idea, with Redfin CEO Glenn Kelman shooting back: “But the loss in demand for commercial real estate is what’s driving demand for residential real estate. People who work from home need more space at home. Sales volume is down because inventory is down. Today, home prices increased for a second straight month.”
