How Worried Should You Be About Commercial Real Estate?

The problems at New York Community Bancorp have reignited fears about commercial real estate across the globe.

More than $1 trillion in commercial mortgages will come due in the next two years and analysts are concerned about what could happen to other banks that have lent money for commercial buildings, many of which have tumbled in value as borrowing costs climbed.

The basic problem? The banks hold debt on buildings that are no longer worth what they were just a few years ago, but no one is exactly sure which loans might unravel. And even as stocks trade at all-time highs, there is looming concern that commercial real estate distress could derail the US economy.

Bloomberg 10 February 2024

How Scared Should You Be About Commercial Real Estate?

Federal Reserve’s bank stress test released this week assumed a worst-case scenario where commercial real-estate prices drop 40%, with falls concentrated in office and retail. REIT investors think that for offices, and to a lesser extent retail, the stress is already here.

The rest of commercial real estate is doing OK

James Mackintosh WSJ 30 June 2023


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