R
eal estate mogul Ben Mallah is selling off his vast commercial real estate portfolio, citing concerns about a market correction. In a recent podcast episode, he attributed this decision to the actions of banks, which he believes are playing a game of "pray and delay" rather than facing the reality of troubled loans. According to Goldman Sachs estimates, $270 billion in commercial loans due in 2023 have been extended until 2024, effectively kicking the can down the road.

    However, this extension has only delayed the inevitable. As of 2024, troubled commercial loans are worth a staggering $1.3 trillion, with roughly half due within two years. Shark Tank star Kevin O'Leary predicts that banks will eventually fail due to their exposure to commercial real estate, which accounts for up to 40% of their portfolios.

    Mallah's concerns are not unfounded; he lost around $1 million on his preferred equity stake in Silicon Valley Bank when it collapsed last year. Despite this setback, he remains optimistic about the market's future, predicting that a correction is imminent and will bring opportunities for savvy investors.

    Some segments of the commercial real estate market are already showing resilience, such as data centers, which are experiencing strong growth driven by the development of artificial intelligence products. Investors can gain exposure to this expanding market through Digital Realty (DLR), a real estate investment trust that owns over 300 data centers worldwide.

    Multifamily real estate is another promising area, with JPMorgan analysts predicting a "largely positive outlook" due to a shortage of housing supply and rising rents. Mid-America Apartment Communities (MAA) offers an attractive dividend yield and has already seen a 19% year-to-date increase in stock value.