'If nothing changes — if interest rates remain elevated and property values do not improve — we do view defaults at the rate of the Great Recession, and in fact even higher, as quite a possibility,' one of the co-authors, Columbia Business School professor Tomasz Piskorski, told DailyMail.com.
Commercial real estate 'debt bomb' of $929 billion comes due this year with HUNDREDS of banks facing insolvency runs if default rates on the loans spike
- Some $929 billion in commercial real estate loans will come due in 2024
- About 14% of all CRE loans and 44% of office loans appear to be underwater
- Recent study warns of widespread risk of bank failures if defaults spike to 10%
Experts are sounding alarms that the distressed US commercial real estate market could trigger a new banking crisis, if default rates on commercial mortgages rise sharply.
Some $929 billion of outstanding commercial mortgages held by lenders and investors will mature in 2024, or 20 percent of the $4.7 trillion total outstanding debt, according to recent data from the Mortgage Bankers Association.
Meanwhile, higher interest rates are battering commercial real estate (CRE) property values across the board, with office buildings hit particularly hard due to the enduring popularity of remote and hybrid working.
Disturbingly, about 14 percent of all CRE loans, and 44 percent of office loans, appear to be 'underwater,' with current property values that are less than the outstanding loan balances, according to a recent working paper for the National Bureau of Economic Research.
'If nothing changes — if interest rates remain elevated and property values do not improve — we do view defaults at the rate of the Great Recession, and in fact even higher, as quite a possibility,' one of the co-authors, Columbia Business School professor Tomasz Piskorski, told DailyMail.com.
Cash-Flush Buyers Dip Into Distressed Commercial Real Estate
With many owners unable to extend their loans, investors are starting to pounce on these properties
Updated Feb. 12, 2024 2:20 pm ET
Turmoil in commercial real estate is sending jitters through regional banks and other lenders. But one group is pleased with the turbulence: investors sitting on piles of cash they raised to scoop up distressed properties.
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