Industrial Size Surplus

Stagnating Desk Demand
Additive Change
Excess Meets Scarcity
Portfolio Construction for The Great Reset
Florida and Cape Town

Modern economies, even small ones, are unfathomably complex. The number of variables is far more than any human can comprehend or any model can track. It’s really no wonder so many forecasts are wrong.

In my 2024 forecast letter I predicted “A Muddle-Through Year.” That’s still what I expect… but not for everyone, nor for every corner of the economy. Some people are going to have problems. Today’s letter will focus on one sector I think will face problems: commercial real estate. CRE may have a harder time than many others in this Muddle-Through world.

We knew when the Fed started raising rates almost two years ago (I know, time flies) that highly leveraged industries would be hit the worst. Few are more leveraged than the owners of large commercial properties. They take on giant debt to build properties and hope the income covers it. Higher financing costs can raise the breakeven point quickly.