by Calculated Risk on 1/05/2008 09:55:00 PM

From the Economist: Dominoes on the skyline

FROM up high, London is a picture of vigorous renewal. In just about every direction, construction cranes point contemplatively to the skies. They also point to the great boom that has taken place in commercial property in recent years. The collapse of that boom, which now threatens to slash the values of these gleaming office towers and destroy the savings of millions, may pose almost as great a threat to Britain's banking system as the subprime crisis that has been roiling financial markets since late in 2007.

... with the impeccably bad timing the industry is known for, construction boomed just as the market was peaking. CB Richard Ellis, a consultancy, reckons that new offices are being built in London at their fastest rate in nearly two decades. Most of the ones going up this year have yet to find tenants (see chart), and not all will ...

The CRE slowdown was very predictable, but I doubt it will "pose almost as great a threat to Britain's banking system as the subprime crisis" because CRE wasn't as overbuilt as residential.