30 October 2023
The US commercial real estate sector is in crisis, with widespread underutilization of office spaces leading to financial strain on regional banks holding unrecognized losses. Occupancy levels post-pandemic are stuck at about half, and property values have dropped by up to 45%. With $5.5 trillion in debts and interest rates rising, the sector faces distressed sales and significant lender losses. Banks are cautious about refinancing, potentially leading to a wave of consolidations and a broader financial impact. The situation mirrors the pre-conditions of previous financial crises, with the Fed’s temporary measures failing to address deeper solvency issues.