BofA Clients Yank $451 Million From Real-Estate Stocks on Property Fears

  • Bank of America saw its clients pull $451 million from real-estate stocks last week. 
  • It’s largest outflow since July 2021, as concerns about the commercial property market intensify. 
  • Commercial real estate is facing headwinds from higher interest rates to tighter credit conditions. 

Bank of America’s clients pulled $451 million from real-estate stocks last week as troubles in the commercial property sector heat up. 

“Outflows from real estate were the largest since July 2021 amid concerns around commercial real estate,” bank’s strategists led by Jill Carey Hall wrote in a Tuesday note. 

Worries about the health of the commercial property sector are building as it faces a string of headwinds, from higher interest rates and work-from-home trends to tighter credit conditions. 

High borrowing costs and higher standards for obtaining loans — part of the fallout from the turmoil that hit banks in March — could raise hurdles for big property owners as they seek to refinance a pile of loans.

Nearly $450 billion in commercial real-estate debt is due to mature in 2023, per data cited from Trepp by JPMorgan. That means a final payment on those loans is scheduled to be paid before the end of the year.

To make matters worse, occupancy rates in offices across the country are still far from prepandemic levels, thanks to remote work trends — and that’s weighing on property valuations. That’s sparking concerns that commercial property owners could ultimately default on their debt. 

Top market commentators and Wall Street banks have sounded the alarm on the commercial real-estate market. Morgan Stanley Wealth Management’s top strategist has forecast prices could plunge as much as 40% from their peak, in a worse crash than the 2008 financial crisis. 

At the same time, Bank of America clients pulled $2.3 billion from US stocks last week, when the S&P 500 was down 0.1%.

“Clients sold US equities (-$2.3B) for a second consecutive week, with outflows from both single stocks and ETFs (first ETF outflows since early March),” the bank’s strategists wrote. 

While the bank cited no reason for the exodus from US equities, the outflow likely reflects growing pessimism about the prospects for the S&P 500 over the past month.

Stock market veterans such as Jon Wolfenbarger have said the benchmark index has another 45% downside as investors are still blind to an impending US recession. 

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