Commercial Property Losses Hammer Banks on Three Continents

Banks in the U.S., Japan and Switzerland announced losses tied to troubled real-estate lending

Investors have wondered when the pain from the downturn in commercial property would hit banks. The past 24 hours showed it is happening right now

In Switzerland, the private bank Julius Baer said Chief Executive Philipp Rickenbacher resigned after the company took a roughly $700 million provision on loans it said it may not get back from the Austrian property landlord Signa Group. The group said it would shut down the unit that made the loans.

Banks are big lenders to real-estate owners and developers, putting them on the front line of the downturn in office building use and falling valuations. 

The risks are particularly acute for small and regional lenders, which have far higher chunks of their loan portfolios in commercial real estate than big banks.

Bloomberg 1 February 2024



Owners of the most elite buildings escaped this fate for a while 

by convincing the market they had created a new class of office tower—one that surpassed the traditional Class A building at the top of the pecking order. 

These landlords persuaded blue-chip tenants that reluctant workers would return if only their offices sparkled with lush roof decks, fully loaded gyms and food prepared by Michelin-starred chefs. 

Owners invested heavily in these properties, which were usually new developments with the best locations, views, air quality and modern designs.

But that strategy is losing steam as more companies have accepted the reality of hybrid work schedules and, for the most part, have given up on compelling workers to be in five days a week.

Wall Street Journal 30 January 2024




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