US Commercial Real Estate

The US commercial real estate sector is under considerable strtess. Will it become the next subprime?

• Despite every effort, downtown businesses have not been able to get all their workers back because they liked foregoing the long commute.

• Commercial real estate valuations are falling and properties are difficult to sell.

• The number of properties with negative equity is increasing.

• Commercial real estate delinquency rates have already jumped to 6 1/2 percent—up 30 percent in a matter of months. Rates of distress in office loans just hit 11 percent.

• $929 billion of commercial real estate debt is coming due before the end of the year. That’s up 28 percent from the previous year.

• National Bureau of Economic Research has estimated that up to 385 American banks could fail over commercial real estate loans alone.

• The FDIC is essentially guaranteeing more than $20 trillion in deposits with just more than $100 billion in reserves.