(New York)

Many in the industry think a big bust in commercial real estate (CRE) is coming. If you think of the residential real estate market, you probably think about tight supply, rising prices, and more buyers than sellers. The commercial real estate market is currently characterized by the opposite conditions. A building boom and a glut of new CRE debt is threatening to wipe the sector out. The sector looks very vulnerable to rising rates because the massive amount of debt (which just hit a record) and the overindulgence of borrowers. So how can one play the fall? Oddly, the best strategy might be to buy homebuilders, who will be much less sensitive to rate rises, and sell REITs.

FINSUM: The paired strategy sounds like a good one, but the bigger theme here is that a bust in CRE is reportedly on the horizon.