- Property billionaire Jeff Greene has sounded the alarm on commercial real estate.
- Offices will be hit hard if recession strikes and AI eliminates some white-collar jobs, he said.
- Greene pocketed about $800 million by predicting and betting against the mid-2000s housing bubble.
A real estate billionaire who made a fortune shorting the mid-2000s housing bubble is bracing for another painful downturn.
“We are heading into a very frightening time in the entire real estate industry,” Jeff Greene warned in a Fox Business interview on Friday. He predicted that many businesses and consumers would fall behind on their rent and mortgage payments as higher interest rates bite, and struggle to secure financing as banks pull back from lending.
Greene cautioned that the pain in commercial real estate is only just beginning. Some parts of the heavily leveraged sector face not just crippling debt costs and a credit crunch, but also pressure on asset values and a structural shift toward remote and hybrid working.
“What’s happening in office space today, this is before the slowdown,” he said. “Wait until we have the recession.”
The real estate tycoon suggested that historic amounts of fiscal and monetary stimulus during the pandemic are still shoring up demand and employment in the US economy, staving off a surge in late payments and foreclosures. However, he predicted that companies would pare both their workforces and office spaces as the economic picture darkens and higher borrowing costs squeeze them.
“How about when AI starts to kick in?” he added. “That’s gonna be a sledgehammer to white-collar jobs.”
Greene raked in an estimated $800 million profit by betting roughly $50 million on a tidal wave of defaults on subprime mortgages in 2006 and 2007, according to Forbes. He got the idea to buy credit-default swaps on mortgage-backed securities from hedge fund manager John Paulson, who made about $15 billion for his clients from similar wagers.
Michael Burry, the investor of “The Big Short” fame, employed a similar strategy to cash in when the housing bubble burst.
Greene’s latest comments echo those of “Shark Tank” investor Barbara Corcoran, who recently warned that corporate tenants are starting to fall behind on their monthly payments, and that could spell trouble for commercial real estate overall.
“I don’t see that turning around,” she said. “I think it’s going to be a bit of a bloodbath before it gets better.”
