(Business Insider) - Leon Cooperman says pain is coming for the commercial real estate market as turmoil in the global banking sector forces banks to tighten lending standards and strengthen liquidity.
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Leon Cooperman says the commercial real estate sector will be the next market hit by bank turmoil.
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Banks will tighten lending standards to focus on liquidity, he told CNBC.
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The billionaire investor broke down why he's maintaining an "overall cautious view" of the economy.
In an interview with CNBC, the billionaire investor said institutions are pulling back on lending and commercial real estate commitments as a way to shore up liquidity.
"I think it will spread into commercial real estate as banks become more reluctant to lend," Cooperman said Monday. "That seems to be the whipping boy right now, [but] we'll survive this."
The commercial real estate market is operating in a perfect storm of rising interest rates, declining occupancy rates for offices, and now, less access to credit. There's a huge impending rollover of debt that was initially financed in a low interest rate environment.
This could impact smaller and medium-sized banks with higher commercial real estate exposure. Lenders with less than $250 billion in assets make up 80% of commercial real estate lending, according to a March 16 report by Goldman Sachs economists David Mericle and Manuel Abecasis.
Cooperman previously predicted that the economy would head into a recession and subsequent stock market bottom on a combination of higher oil prices, quantitative easing, Federal Reserve tightening, and a strong dollar by the end of 2023.
"We've had irresponsible fiscal monetary policies for a long time. We were buying mortgages when house prices were running ahead 30%," Cooperman added. "That made no sense so we woke up to the inflation problem. 64% of typical business costs [are from] labor and with 1.7 jobs [are] available for everybody seeking a job. It's not an environment where labor's going to moderate its demands greatly so I think inflation will be higher than we think."
The fund manager now says there's still "runway a little bit" for a market low but maintains an "overall cautious view" of the economy.
By Morgan Chittum
