One billionaire real estate investor is gravely concerned about the commercial industry in particular. Real estate tycoon Jeff Greene, who bet against the mid-2000s housing bubble and netted about $800 million, told CNBC Tuesday that we’re only in the very early stages of the commercial real estate correction.

“I think we’re just in the first inning of this correction,” Greene told CNBC. “I hate to say it.”

A continuous drop in U.S. consumer savings has had a major impact on the commercial real estate market, Greene explains. At the end of the pandemic, there was an extra $2.1 trillion in people’s savings accounts, which shrunk to $500 billion by March 2023 and now stands at just $190 billion, according to the Federal Reserve Bank of San Francisco.

“As that disappears and completely evaporates with people’s bank accounts—all that money—there’s going to be a lot less money to spend,” Greene says. Greene, who is worth about $7.5 billion today, earned his fortune by buying credit default swaps on subprime-mortgage-backed bonds during the 2008 housing market crash. 

The San Francisco Fed even predicts that excess savings U.S. households built up during the pandemic will likely be exhausted this quarter. Indeed, estimates from the Bureau of Economic Analysis show that household disposable income was lower and personal consumption was higher than previously reported for late 2022 and early 2023.

“The combined revisions brought down the Bureau’s measure of aggregate personal savings by more than $50 billion,” San Francisco Fed economists Hamza Abdelrahman and Luiz E. Oliveira wrote in a mid-August blog post. “In addition, second-quarter data indicate that household spending continued to grow at a solid pace.”

The loss of extra cash flow is ultimately going to affect all aspects of real estate, Greene predicts. 

“So what’s that going to mean for demand for everything?” Greene questions. “Retail, offices, apartments—every aspect of real estate is going to get whacked. I think we’re just in the first inning [of a correction].”

Other real estate researchers, institutions, and experts have confirmed concerns about the commercial real estate market for the next couple of decades. Capital Economics has one of the least optimistic outlooks for the commercial real estate market, suggesting that the “35% plunge in office values we’re forecasting by end-2025 is unlikely to be recovered even by 2040,” meaning office values might now regain their pre-pandemic values in the next two decades.

Lisa Shalett, chief investment officer for Morgan Stanley Wealth Management, suggests that rising vacancy rates and declining property values could lend itself to a crash even worse than the Great Financial Crisis. 

“More than 50% of the $2.9 trillion in commercial mortgages will need to be renegotiated in the next 24 months when new lending rates are likely to be up by 350 to 450 basis points,” she wrote in a note back in April 2023. “[Morgan Stanley] analysts forecast a peak-to-trough CRE price decline of as much as 40%, worse than in the Great Financial Crisis.”

Some banks, however, suggest that the commercial real estate market is not in crisis despite a decline in transaction volumes in 2023.

“Despite these challenges, we believe the sector is not in a crisis, as successful dealmakers will find opportunities,” according to PwC’s U.S. Deals 2023 midyear outlook report.