- The commercial real estate crash has already started, Corion's Fred Cordova told Fortune.
- The office sector is already cratering due to high interest rates and people working from home.
The commercial real estate crash has already started with the office sector set for a cataclysmic slump, according to one top executive.
Corion Enterprises CEO Fred Cordova said in an interview published Thursday that warnings issued by investment banks including Goldman Sachs and Morgan Stanley have come too late, with office prices already in freefall.
"They're not sounding the alarm, they're ringing the bell when the horses are all out of the barn," he told Fortune. "This has been coming for some time."
"What's happening in the office sector is apocalyptical. We're creating this huge class of zombie buildings, buildings that no one wants to put any money into because the capital structure is broke," Cordova added.
Rising interest rates and turmoil in the regional banking sector have both fueled fears of a commercial real estate crash.
The Federal Reserve has raised borrowing costs from near-zero to over 5% over the past 15 months – and that's weighed on property valuations because it becomes more expensive for prospective buyers to take out a mortgage.
Silicon Valley Bank's collapse also led to the collapse of other regional lenders, creating a liquidity crunch that many expect to further hurt commercial real estate.
Office prices are already tanking, according to Cordova, who said that a building bought for $230 million would probably now sell for $100 million.
As well as being vulnerable to rising rates and banking panic, the sector is wobbling because of the pandemic-fueled work-from-home trend, which has reduced companies' demand for office space.
"Have you seen the Denzel Washington movie 'Flight'? Well, the wings of the plane are on fire, the plane is coming down," Cordova told Fortune. "It's just a matter of how hard it's going to hit. It is apocalyptical."