US commercial real estate faces a crisis: 19% office vacancy rate hits record highs, $1.7 trillion of debt maturing soon. 2/3 of all CRE loans held by small banks

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The landscape of US commercial real estate (CRE) is facing unprecedented challenges, with prices plummeting 21% from their 2022 peaks. The latest figures reveal a staggering milestone: the US office vacancy rate has surged to a historic high of 19%, eclipsing levels observed during the financial crises of 2008 and 2020.

To put it starkly, approximately 1 out of every 5 offices across the nation now sits empty, a stark indicator of the sector’s distress. Compounding these woes is the looming specter of approximately $1.7 trillion in CRE debt set to mature between 2024 and 2026. This impending wave means that nearly 30% of existing CRE debt will require refinancing at significantly higher interest rates.

Adding to the complexity is the disproportionate burden on regional banks, with 70% of these loans held by small banks already grappling with the pressures of a regional banking crisis. This convergence of factors paints a bleak picture for CRE, pushing it well beyond bear market territory.

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