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Cantor Fitzgerald CEO Howard Lutnick has seen the future of the commercial real estate sector, and he is observing a messy time ahead.

“I think $700 billion could default,” said Lutnick in an interview on Fox Business from the World Economic Forum in Davos, Switzerland. “The lenders are going to have to do things with them. They’re going to be selling. It’s going to be a generational change in real estate coming, end of 2024 and all of 2025. We will be talking about real estate being just a massive change, $700 billion to $1 trillion in defaults coming. I think it’s going to be a very, very ugly market in owning real estate over the next, you know, 18 months, two years.”

Lutnick stated that high rates will bring about a scenario where commercial loans will be “wiped out.”

“I think what’s going to happen is loan sales, which no one talks about, are going to become a huge business,” he continued. “Because when mortgages on commercial buildings come to a trillion coming due in the next two and a half years at these high rates, you’re not going to get proceeds. Meaning when you have $120 million loan on a building and somebody says, ‘I’ll give you $90 million at a much higher rate,’ you throw the keys back to the lenders… Real estate equity rates are going to be in trouble.”

Lutnick also predicted the Federal Reserve will move through 2024 without making drastic rate cuts.

“I think rates are going to stay sort of steady Eddie. I think all this talk of 175 basis point cuts, that’s just way too much,” he said. “Way too much. I think [it] could be 50 basis points, maybe 75. But that’s it. So I just think it’s overdone. People are overly optimistic for rates. I think we’re going to stay around here. But that’s okay. The world is ready for steady.”

Photo courtesy of Howard Lutnick’s X account