Navigating Crises: The Critical Need for Experienced Asset Management

Over the past 35 years, lending markets have faced several periods of distress. The late 1980s and early 1990s saw the US Savings and Loan Crisis, leading to financial instability. The early 2000s experienced a rise in defaults due to the dot-com crash, but this was minor compared to the Global Financial Crisis (GFC) of 2008-2009, which caused significant global disruptions.

Despite these challenges, the last 15 years have seen continuous growth in real estate values and increased bank lending, driven by demand and fuelled by low capital costs. Historically low interest rates persisted until recently when inflation, exacerbated by Covid-related government spending, led to sharp increases in rates. This spike, combined with cultural changes like remote work, has created distress in all real estate sectors, even traditionally safe ones like “sheds and beds“.

Professionals who started their careers after 2010 have never dealt with base rates exceeding 3% or managing problem loans and distressed properties. Consequently, outside of the most senior team members, lenders lack the expertise to handle these distressed situations.

In today’s environment the need for experienced professionals in special servicing and asset management becomes increasingly critical. These professionals must possess not only the technical skills but also the historical perspective to manage the current market dynamics effectively.