Tuesday, June 6, 2023

Will bad real estate loans cause more problems for banks?

 Two potential problems:

Interest-only loans:  Nearly $1.5 trillion in commercial mortgages are coming due over the next three years, according to data provider Trepp. Many of the commercial landlords on the hook for the loans are vulnerable to default in part because of the way their loans are structured.

Reduced demand for office space:  After the spate of bank closures that included Silvergate, Signature NY, Silicon Valley Bank (SVB) and Credit Suisse, there is now talk of a major crisis—not just in the banking sector, but in other sectors, especially in commercial real estate.

There is an oversupply of office space in big cities like Los Angeles, San Francisco and New York that has been complicated by the work-from-home and quiet quitting trends.

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