Following last month’s banking sector woes prompted by the demise of SVB, Signature Bank and Credit Suisse, Paul Marshall, founder of hedge fund Marshall Wace, has warned investors that commercial real estate could be the next sector to experience market jitters, according to a report by Bloomberg.
In letter to investors seen by Bloomberg, Wace highlighted that while the collapse of SVB was swiftly contained, lenders have gone into “self preservation mode” and that lending in general will now be even harder to access in a “zombified banking system”. According to Marshall, commercial real estate is under particular strain from tighter financing and pressure on rents.
“We are now likely to experience a fairly severe credit crunch which significantly increases the risk of recession,” Marshall wrote in the letter. “Commercial real estate, and especially office property, is the next shoe to drop.”
According to the letter, Marshall Wace’s flagship Eureka hedge fund, overseen by Marshall himself, was net short the real estate sector at the end of March, and gained 0.5% last month, while the firm’s Global Opportunities fund chalked up a 5% gain.