Bonfire’s take: With interest rates and cap rates increasing, the paper value of commercial real estate assets are down roughly 22%. But given how powerful leverage is (for better or worse), if commercial real estate values are down 22% it means that roughly half of equity has been wiped out. Someone's loss will become someone's else's gains. More on that below. 

Lag Between Sales Volume & Price

Looking back at the 2007 downturn, office (as well as industrial and retail) real estate transaction volumes peaked and then significantly declined, taking two years to hit a low. Despite a 63% increase in transaction volumes over the following two years, office prices per square foot continued to drop, indicating that increased transaction flows can exacerbate price declines.

No one is smart enough to market time and call “the bottom.” That said, no one wants to catch a falling knife. Bonfire believes this is the time to be extremely judicious and rigorous with underwriting but have the courage and conviction to capitalize upon distressed opportunities if the right deal comes. 

"Buy Now Pay Later" spending soars 20% compared to last year’s Black Friday while credit card debt hits and all-time high. Hmmm. It’s hard to see how "deals" that are 20% off are being financed with credit card debt that has a 30% interest rate ends well. At what point does the almighty US consumer hit a wall?

“Spend each day trying to be a little wiser than you were when you woke up. Day by day, and at the end of the day - if you live long enough - like most people, you will get out of life what you deserve.” - Charlie Munger

This one has nothing to do with real estate or business but in the spirit of Charlie Munger living to age 99, it from the human biologist Gary Brecka and all about the bio-hacks involved in longevity. The long and short: sitting is the new smoking.

Joshua Kagan,

CEO, Bonfire