Commercial Real Estate Analyst: Malls are going through 'real reinvention'

The commercial real estate sector has been under a microscope following the collapse of Silicon Valley Bank. A new report from Moody’s explains why banking turmoil mixed with rising interest rates could lead to vulnerability.

Moody’s Analytics Head of CRE Economic Analysis Kevin Fagan told Yahoo Finance Live that despite concerns surrounding office buildings, he’s focused on another space.

“It’s malls that really have experienced the most pain. They’re going through a real reinvention, akin to what some offices are going to have to go through,” he says.

Despite a difficult post-pandemic stretch, Fagan says that hotels are "one of the only positive stories right now.”

“They’ve really ridden the wave of revenge travel,” he adds, but warns that a bumpy ride could still be ahead. “If the economy turns down, don’t be surprised if hotel does as well,” he explains.

You can watch Rachelle Akuffo's full interview with Kevin Fagan here.

Key Interview Moments:

00:00:14 - Malls have experienced the most pain

00:00:29 - Hotels only positive

Video transcript

- You can see some real unexpected price corrections in the multifamily sector. For such a strong asset class, the pricing has just been too tight for many of them. Industrial has been very strong. Retail has actually been quite strong, surprisingly. It's malls that really have experienced the most pain. They're going through a whole reinvention, akin to what some offices are going to have to go through. But the kind of

Normal neighborhood community shopping centers have been sleepily doing well. And hotels, they kind of bounce all around all over the place. Surprisingly, hotels are one of the only positive stories right now. Coming out of COVID, they got hit worse probably than any business sector at all, hospitality. But they've made a big comeback. They've really ridden the wave of revenge travel that's still going on. The TSA numbers are still 110% over what they were in 2019. So that sector is actually doing well right now, but it's extremely pro-cyclical. So if the economy turns down, don't be surprised if hotels does as well.