Pimco has sent out a warning to all investors that the capital flows that supported the US real estate market since the 2008 Financial Crash is decreasing slowly.
Pimco states it is with the volatility in public markets, tightened regulations, maturing loans and uncertain foreign capital flows are creating huge blasts of volatility for the United States commercial real estate.
Deutsche Bank’s own analysis warned about the decline in commercial real estate in the United States noting that several measures of on-the-ground spending neared 90% of the levels where they peaked from 2002 to 2008.
Pimco said the new rules since the financial crisis would prompt banks to slim down to ensure liquidation and creation of new markets where necessary.
The process of liquidation is somewhat limited as hedge funds that tried to sell their positions in February to banks didn’t manage to do so due to the lack of a market.
Pimco advises investors that there will be a huge shuffle. Investors who understand real estate would see the storm as a ‘welcome one’ while others might want to sell their current positions to prime themselves for the upcoming ‘storm’.