Will Commercial Real Estate prices fall?

The Economist calls it "a hellish-perfect-dumpster-fire-storm."

The situation poses a problem for two big, intertwined American industries. The first is property, where owners are grappling with the idea that the office buildings they own—uncomfortably empty and unlikely to fill up again—might only be worth half what they paid for them. The second is their financiers. When Brookfield, an asset manager, recently decided it would be better off handing over the keys of two vast office towers in Los Angeles, rather than refinancing the $784m of loans it owed on them, it handed the keys over to Citigroup and Morgan Stanley, two big banks.

Banks will end up responsible for lots of offices, which they will likely have to sell at deep discounts. This will bring back memories of the global financial crisis of 2007-09. But there are reasons to think history is not about to repeat itself. First, commercial property is worth just half as much as residential real estate, which is where problems began last time around. Second, lax lending saw banks grant mortgages worth as much as 100% of a home’s value before the financial crisis. Commercial-property lenders offer a borrower a maximum 75% mortgage, meaning prices will have to fall much further for banks to face losses. ...

Look out the windows of The Economist’s office in Washington and on any given weekday a handful of builders are busy converting the old Vanguard building, an office that once housed the Peace Corps, into a block of shiny new apartments