Texas commercial real estate mogul Ross Perot Jr. says a CRE recession looks likely: ‘It’ll be years before we really understand the damage the pandemic did to the world’
In the 1970s, Ross Perot Jr., who’s now chairman of the Perot Group and Hillwood, and his father bought and sold land. His father was, of course, Ross Perot, two-time presidential candidate and founder of Electronic Data Systems, and eventually, Perot Systems—deemed “the fastest richest Texan ever” in 1968 by Fortune.
Well into the 1980s after he’d been buying and selling land on his own, Perot Jr. founded Hillwood, a Dallas, Texas-based commercial and residential real estate development company. Following the savings and loan crisis, Perot says he “became a developer out of necessity.”
After four decades of low inflation and low interest rates, the era of cheap money has ended—and the tailwinds he’s seen throughout his real estate career have turned into headwinds, Perot Jr. says. High interest rates coupled with tightened credit, which have made borrowing more expensive and more difficult, along with the transition to working from home, have Perot suggesting that “commercial real estate, overall, will slow down,” and potentially head toward a recession.
“It’ll be years before we really understand the damage the pandemic did to the world,” Perot tells Fortune, adding that for one, “it broke the habit patterns of millions of people that used to go to work every day in a real office.”
All eyes are on the office sector, and as Fortune has previously covered, some say it’s already crashing. Fred Cordova, chief executive officer and founder of Santa Monica–based commercial real estate brokerage and consultancy firm Corion Enterprises, recently told Fortune that “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 broken.”
Perot’s take isn’t much different, but from his own experience, he says that Dallas hasn’t been hit nearly as badly as Los Angeles, San Francisco, or Manhattan. In fact, his firm is developing an 800,000-square-foot tower for Goldman Sachs that’ll serve as the bank’s Dallas-based office. But New York City is a different story, and he has no idea what will be done with all the old office buildings.
“It’s not attractive enough because now if you do go to the office, people want new, beautiful, highly amenitized offices, and a lot of [them] don’t have the money to fix up, and I think the conversion of office to residential is really going to be hard,” Perot says.
Although Perot does see this as an opportunity for the city and state—he says he’d buy some of those old office buildings, tear them down, and turn them into parks. But that wouldn’t solve New York City’s housing problems.
Before I could finish asking Perot if his concerns regarding commercial real estate extended beyond office, he said it’s all commercial real estate and that “it’s difficult to see how we’re not going to have a real estate slowdown.” Commercial real estate is largely built on debt, and with interest rates that’ve gone up and stress in the banking sector, it’s not so easy to get a loan anymore.
“It’s difficult to get a real estate loan, and it’s difficult when all these loans come due,” Perot says. “Do the banks have the money to renew the loan? That’s the big question. Even if you’ve got a good property, these banks might need the money back to solidify their balance sheet.”
Industrial is strong, but it was overbuilt during the pandemic, Perot says. Multifamily has been overbuilt too. Lending has changed, and for the commercial real estate industry, that means it’s headed into a buying phase rather than a building phase, according to Perot.
“I don’t like the bank loans, I don’t like the amount of equity you need to put into a new project now,” Perot says. “A lot of developers, like myself, we’re going to go risk-off. We’re going to pause.”
Still, he’s optimistic for his own company, even though he tells me his clients are slowing down and it’s becoming tougher to get loans, while “everything is just sort of on unstable ground.” Moving forward, Perot says we should expect a shakeout within the commercial real estate sector, at which point the “weaker players will come to the surface.” Then the sector will enter into a restructuring phase, which could look like veteran developers coming in with rescue capital. But before that happens, a wave of commercial real estate loans are set to mature, which as Fortune has previously reported is likely to result in increased delinquencies and defaults amid tightened credit and falling property values.
“I mean, you’ve got to believe it’s going to happen,” Perot says. “You hope it doesn’t, but you got to prepare for it. And that’s why the banks are not lending, because the banks don’t know what kind of hits they’re going to have on their existing loan portfolio.”
So, what’s next? Well, there’s some good news. For one, Perot says he doesn’t think there’ll be a prolonged housing downturn—and if there is, it won’t be anything like 2008. But within the commercial real estate sector, “you’ll have a recession,” Perot says, pointing out that because the government is increasingly spending on renewables, the industrial space could offset some pain. However, in his view, it all comes down to the relationship between the banks and the commercial real estate sector.
“If the banks are this risk-off, and they’re not making real estate loans, the real estate industry will stop…If the banks don’t loan, you’ll have a recession,” Perot says.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
MONTREAL – The Quebec Professional Association of Real Estate Brokers says Montreal-area home sales rose 9.3 per cent in August compared with the same month last year, with levels slightly higher than the historical average for this time of year.
The association says home sales in the region totalled 2,991 for the month, up from 2,737 in August 2023.
The median price for all housing types was up year-over-year, led by a six per cent increase for the price of a plex at $763,000 last month.
The median price for a single-family home rose 5.2 per cent to $590,000 and the median price for a condominium rose 4.4 per cent to $407,100.
QPAREB market analysis director Charles Brant says the strength of the Montreal resale market contrasts with declines in many other Canadian cities struggling with higher levels of household debt, lower savings and diminishing purchasing power.
Active listings for August jumped 18 per cent compared with a year earlier to 17,200, while new listings rose 1.7 per cent to 4,840.
This report by The Canadian Press was first published Sept. 6, 2024.
In the quest to find cities where renters can enjoy the best of all worlds, a recent study analyzed 24 metrics across three key categories—Housing & Economy, Quality of Life, and Community. The study ranked the 100 largest cities in Canada to determine which ones offer the most to their renters.
Here are the top 10 cities that emerged as the best for renters in 2024:
St. John’s, NL
St. John’s, Newfoundland and Labrador, stand out as the top city for renters in Canada for 2024. Known for its vibrant cultural scene, stunning natural beauty, and welcoming community, St. John’s offers an exceptional quality of life. The city boasts affordable housing, a robust economy, and low unemployment rates, making it an attractive option for those seeking a balanced and enriching living experience. Its rich history, picturesque harbour, and dynamic arts scene further enhance its appeal, ensuring that renters can enjoy both comfort and excitement in this charming coastal city.
Sherbrooke, QC
Sherbrooke, Quebec, emerges as a leading city for renters in Canada for 2024, offering a blend of affordability and quality of life. Nestled in the heart of the Eastern Townships, Sherbrooke is known for its picturesque landscapes, vibrant cultural scene, and strong community spirit. The city provides affordable rental options, low living costs, and a thriving local economy, making it an ideal destination for those seeking both comfort and economic stability. With its rich history, numerous parks, and dynamic arts and education sectors, Sherbrooke presents an inviting environment for renters looking for a well-rounded lifestyle.
Québec City, QC
Québec City, the capital of Quebec, stands out as a premier destination for renters in Canada for 2024. Known for its rich history, stunning architecture, and vibrant cultural heritage, this city offers an exceptional quality of life. Renters benefit from affordable housing, excellent public services, and a robust economy. The city’s charming streets, historic sites, and diverse culinary scene provide a unique living experience. With top-notch education institutions, numerous parks, and a strong sense of community, Québec City is an ideal choice for those seeking a dynamic and fulfilling lifestyle.
Trois-Rivières, QC
Trois-Rivières, nestled between Montreal and Quebec City, emerges as a top choice for renters in Canada. This historic city, known for its picturesque riverside views and rich cultural scene, offers an appealing blend of affordability and quality of life. Renters in Trois-Rivières enjoy reasonable housing costs, a low unemployment rate, and a vibrant community atmosphere. The city’s well-preserved historic sites, bustling arts community, and excellent educational institutions make it an attractive destination for those seeking a balanced and enriching lifestyle.
Saguenay, QC
Saguenay, located in the stunning Saguenay–Lac-Saint-Jean region of Quebec, is a prime destination for renters seeking affordable living amidst breathtaking natural beauty. Known for its picturesque fjords and vibrant cultural scene, Saguenay offers residents a high quality of life with lower housing costs compared to major urban centers. The city boasts a strong sense of community, excellent recreational opportunities, and a growing economy. For those looking to combine affordability with a rich cultural and natural environment, Saguenay stands out as an ideal choice.
Granby, QC
Granby, nestled in the heart of Quebec’s Eastern Townships, offers renters a delightful blend of small-town charm and ample opportunities. Known for its beautiful parks, vibrant cultural scene, and family-friendly environment, Granby provides an exceptional quality of life. The city’s affordable housing market and strong sense of community make it an attractive option for those seeking a peaceful yet dynamic place to live. With its renowned zoo, bustling downtown, and numerous outdoor activities, Granby is a hidden gem that caters to a diverse range of lifestyles.
Fredericton, NB
Fredericton, the capital city of New Brunswick, offers renters a harmonious blend of historical charm and modern amenities. Known for its vibrant arts scene, beautiful riverfront, and welcoming community, Fredericton provides an excellent quality of life. The city boasts affordable housing options, scenic parks, and a strong educational presence with institutions like the University of New Brunswick. Its rich cultural heritage, coupled with a thriving local economy, makes Fredericton an attractive destination for those seeking a balanced and fulfilling lifestyle.
Saint John, NB
Saint John, New Brunswick’s largest city, is a coastal gem known for its stunning waterfront and rich heritage. Nestled on the Bay of Fundy, it offers renters an affordable cost of living with a unique blend of historic architecture and modern conveniences. The city’s vibrant uptown area is bustling with shops, restaurants, and cultural attractions, while its scenic parks and outdoor spaces provide ample opportunities for recreation. Saint John’s strong sense of community and economic growth make it an inviting place for those looking to enjoy both urban and natural beauty.
Saint-Hyacinthe, QC
Saint-Hyacinthe, located in the Montérégie region of Quebec, is a vibrant city known for its strong agricultural roots and innovative spirit. Often referred to as the “Agricultural Technopolis,” it is home to numerous research centers and educational institutions. Renters in Saint-Hyacinthe benefit from a high quality of life with access to excellent local amenities, including parks, cultural events, and a thriving local food scene. The city’s affordable housing and close-knit community atmosphere make it an attractive option for those seeking a balanced and enriching lifestyle.
Lévis, QC
Lévis, located on the southern shore of the St. Lawrence River across from Quebec City, offers a unique blend of historical charm and modern conveniences. Known for its picturesque views and well-preserved heritage sites, Lévis is a city where history meets contemporary living. Residents enjoy a high quality of life with excellent public services, green spaces, and cultural activities. The city’s affordable housing options and strong sense of community make it a desirable place for renters looking for both tranquility and easy access to urban amenities.
This category looked at factors such as average rent, housing costs, rental availability, and unemployment rates. Québec stood out with 10 cities ranking at the top, demonstrating strong economic stability and affordable housing options, which are critical for renters looking for cost-effective living conditions.
Québec again led the pack in this category, with five cities in the top 10. Ontario followed closely with three cities. British Columbia excelled in walkability, with four cities achieving the highest walk scores, while Caledon topped the list for its extensive green spaces. These factors contribute significantly to the overall quality of life, making these cities attractive for renters.
Victoria, BC, emerged as the leader in this category due to its rich array of restaurants, museums, and educational institutions, offering a vibrant community life. St. John’s, NL, and Vancouver, BC, also ranked highly. Québec City, QC, and Lévis, QC, scored the highest in life satisfaction, reflecting a strong sense of community and well-being. Additionally, Saskatoon, SK, and Oshawa, ON, were noted for having residents with lower stress levels.
For a comprehensive view of the rankings and detailed interactive visuals, you can visit the full study by Point2Homes.
While no city can provide a perfect living experience for every renter, the cities highlighted in this study come remarkably close by excelling in key areas such as housing affordability, quality of life, and community engagement. These findings offer valuable insights for renters seeking the best places to live in Canada in 2024.
