Red Roof and the coming commercial real estate meltdown

Red Roof Inns logo
Red Roof Inns logo

Red Roof Inns scared the bejesus out of investors when it was reported that the operator of budget-priced motels had defaulted on four loans totaling $361.4 million.

Worries about the commercial real estate market are starting to eclipse worries about consumer spending that have permeated the psyche of the investing public. Their worries are understandable given that default rates on commercial real estate loans are at a 15-year high because demand for the properties is weak. Tenants have difficulty paying their rents, and hotels and motels are getting pinched by declining business travel.