The commercial real estate (CRE) landscape is facing a challenging scenario, with 14% of all CRE loans and a staggering 44% of office building loans slipping into “negative equity.” This indicates that the debt on these properties now surpasses their market value. The current downturn, with office building prices plummeting by 40%, has pushed CRE into bear market territory, down over 20% overall. As interest rates rise and looming refinancing deadlines approach, the situation poses a significant threat, especially with over $2.9 trillion of CRE debt in the hands of US banks, mostly held by regional institutions.
Over the period of 1 to 2 years, $2 Trillion worth of CRE loans are set to mature & most of it being held by regional banks while at that time when Property values are down 20% & office vacancy rates hit close to 20%
CRE crises could lead to more consolidation in the banking
— N Suresh (@NSuresh_ECW) January 25, 2024