Big banks are more at risk of a commercial real estate meltdown than people think, new study says (2024)

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e=r.searchBoxForm.querySelector("[name=fr]"),n=r.searchBoxForm.querySelector("[name=fr2]");e&&r.config.searchBox&&r.config.searchBox.params&&r.config.searchBox.params.fr&&(e.value=i.searchBox.params.fr,e.disabled=!1),n&&r.config.searchBox&&r.config.searchBox.params&&r.config.searchBox.params.fr2&&(n.value=i.searchBox.params.fr2,n.disabled=!1),r.searchBoxForm.submit()}}),1e3)},r.recognition.onspeechstart=function(){},r.recognition.onspeechend=function(){r.recognition.stop()},r.recognition.onerror=function(){r.speechText&&(r.speechText.innerText=r.i18n.t("search.voice.recognition_error")),r.hideTrending(r),r.showRetryLink(r),r.errorAudio.play()},r.recognition.onaudiostart=function(){r.speechButtonContainer&&r.speechButtonContainer.classList.add("listening")},r.recognition.onaudioend=function(){r.speechButtonContainer&&r.speechButtonContainer.classList.remove("listening")},r.recognition.onsoundstart=function(){r.hideTrending(r),r.noSpeech=!1,r.speechButtonContainer&&(r.speechButtonContainer.classList.remove("listening"),r.speechButtonContainer.classList.add("speaking"))},r.recognition.onsoundend=function(){r.speechButtonContainer&&r.speechButtonContainer.classList.remove("speaking")},r.recognition.onstart=function(){r.recognitionInit(r),r.startRecognition(r)},r.recognition.onend=function(){r.isRecognitionStart=!1,0==r.noSpeech&&""==r.speechResult&&(r.speechText&&(r.speechText.innerText=r.i18n.t("search.voice.recognition_nomatch")),r.hideTrending(r),r.showRetryLink(r),r.errorAudio.play())},document&&document.dispatchEvent&&document.dispatchEvent(new Event("VOICE_JS_READY"))}}o.I18n=m,o.prototype.renderPermissionGuide=function(e){var n='\n

    \n

    \n

    \n

    \n

    \n

    \n

    \n

    '.concat(e.i18n.t("search.voice.permission_title"),'

    \n

    ').concat(e.i18n.t("search.voice.permission_text"),"

    \n

    \n

    \n

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    \n

    \n

    \n

    \n

    \n

    \n \n \n \n \n \n \n

    \n

    \n

    \n \n \n '.concat(e.i18n.t("search.voice.recognition_retry"),'\n

    \n

    \n

    \n

    \n

    \n

    \n ').concat(e.i18n.t("search.voice.trending_title"),'\n \n

    \n

    \n

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e)&&("SpeechGrammarList"in e||"webkitSpeechGrammarList"in e)}}],d=0;d0){var n=e.speechResult.charAt(e.speechResult.length-1);"."!==n&&"?"!==n&&"。"!==n&&"?"!==n||(e.speechResult=e.speechResult.slice(0,-1))}},o.prototype.sendBeacon=function(n,t){var o=e.YAHOO.ULT||{},i=e.YAHOO.SB||{};if(o.beacon_click){var r={_S:i.config.i13n.spaceid,_I:i.config.i13n.pvid,actn:n,sec:"search",slk:t};e.YAHOO.ULT.beacon_click(r)}},o.prototype.ajaxReq=function(t,o){var i,r,a=XMLHttpRequest.DONE||4,s=new XMLHttpRequest;if(n.documentMode&&n.documentMode<10)return(new e.XDomainRequest).onload=function(){try{r=JSON.parse(i),o(r)}catch(e){return}},s.open("GET",t),void s.send();s.onreadystatechange=function(){if(s.readyState===a)if(200===s.status){i=s.responseText;try{r=JSON.parse(i),o(r)}catch(e){return}}else o(r)},s.open("GET",t,!0),s.timeout=1e4,s.send()},e.YAHOO||(e.YAHOO={}),e.YAHOO.Util||(e.YAHOO.Util={}),e.YAHOO.Util.VoiceSearch=o}(window,document)}();var Wn={containerClass:Un.tooltip,textClass:Un.tooltip__text,showClass:Un["tooltip--show"]},Jn=["zh-hant-tw","zh-hant-hk"];ye("ybar-mod-searchbox",(function(e){var n={ybar:document.getElementById("ybar"),searchInput:document.getElementById("ybar-sbq"),buttonBar:document.querySelector(".".concat(Un["sa-btn-bar"])),voiceSearchBtn:document.getElementById("ybar-sbq-voice"),searchForm:document.getElementById("ybar-sf"),searchBoxIcon:document.querySelector(".".concat(Un["searchbox-icon-uh3"])),searchBoxPlaceholder:document.getElementById("ybar-smartphone-searchbox-placeholder"),searchBoxBackButton:document.getElementById("ybar-search-back-btn"),shopsButtonsWrap:document.querySelector(".".concat(Un["shops-buttons"])),categorySelect:document.getElementById("shops-category-select"),selectedMerchantInput:document.getElementById("selected-merchant-input"),selectedMerchantClearButton:document.querySelector(".".concat(Un["selected-merchant-clear-button"])),submitSearchBtn:document.getElementById("ybar-search"),clearSearchBtn:document.getElementById("ybar-sbq-x")};!function(e,n){var t,o,i,r=e.getConfig();if(n.ybar&&"desktop"===r.device&&(null===(t=r.bucketConfig)||void 0===t?void 0:t.highlight_searchassist)&&(null===(o=r.bucketConfig)||void 0===o?void 0:o.overlay_class)){n.ybar.setAttribute("data-ovrly-bkt",r.bucketConfig.overlay_class),null===(i=n.searchForm)||void 0===i||i.classList.add(Un[r.bucketConfig.overlay_class]);var a=document.createElement("div");a.classList.add(Un.overlay,Un[r.bucketConfig.overlay_class]),document.body.appendChild(a),e.onDestroy((function(){document.body.removeChild(a)})),e.addElementListener(n.searchForm,"focusout",(function(e){if(n.searchForm&&n.searchInput){var t=e.relatedTarget;t&&!n.searchForm.contains(t)&&window.YAHOO.SA&&window.YAHOO.SA.apps&&window.YAHOO.SA.apps[0]&&window.YAHOO.SA.apps[0].view.shown&&window.YAHOO.SA.apps[0].view.hide()}}))}}(e,n),zn(e,n),n.voiceSearchBtn&&function(e,n){var t=e.getConfig(),o=t.locale,i=function(){var e,t;(null===(t=null===(e=window.YAHOO)||void 0===e?void 0:e.Util)||void 0===t?void 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    Big banks are more at risk of a commercial real estate meltdown than people think, new study says (2024)

    FAQs

    Will the US commercial property meltdown lead to a banking crisis? ›

    The damage could metastasize into a full-blown financial crisis if scores or even hundreds of small- and midsize commercial banks fail simultaneously. A worst-case scenario might include contagion to other economies and banking deserts across the U.S.

    Why would banks make bad commercial real estate loans? ›

    Banks might make bad loans if potential losses on the loans are borne by entities other than the banks. Why would investors buy securities that contain bad commercial real estate​ loans?

    What is the biggest problem in commercial real estate? ›

    Technological advancements and digital disruption are the biggest challenges and opportunities facing commercial real estate. With changing tenant preferences, it has become imperative for professionals to adapt to the digital landscape.

    Is real estate a high risk industry for banks? ›

    Regional banks, heavily reliant on commercial real estate, lack diversified revenue streams, which increases risk. High concentrations in specific client types, like venture capital or wealthy individuals, have led to significant failures, exemplified by Silicon Valley Bank and First Republic Bank.

    How is commercial real estate affecting banks? ›

    Nearly half of all U.S. banks have commercial real estate debt as their largest loan category, making them particularly susceptible to market fluctuations. This significant exposure presents considerable risks, especially amid economic uncertainty and potential regulatory changes to reduce systemic risks.

    What banks to watch if commercial real estate weakens? ›

    Those banks include Cullen/Frost Bankers, Synovus Financial, M&T Bank, and Citizens Financial Group. Pancari tells Barron's that he doesn't expect commercial real estate loans to trigger failures among these relatively large regional banks.

    Why are commercial banks not usually a reliable source of new venture financing? ›

    Even a profitable startup and small business can struggle to keep enough cash in their bank account. Poor cash flow management is a big reason why banks reject business' loan applications.

    Why is commercial real estate risky? ›

    Liquidity Risk

    If a CRE owner had to sell their asset within 24 hours, they would likely have to sell at a price well below market value. So, commercial real estate is illiquid compared to most other types of assets. The degree of illiquidity varies according to location, property type, and market cycle.

    Why are commercial real estate loans risky? ›

    These problems can result from property damage, lawsuits, or a lack of demand for products. For this reason, most lenders consider small businesses as high-risk customers, so expect them to scrutinize your business finances before approving your commercial loan.

    What is the biggest threat to real estate? ›

    Economic uncertainty and market volatility are two of the most significant risks that real estate investors face.

    Does commercial real estate do well in inflation? ›

    Commercial real estate is widely considered to be a good long-term hedge against inflation, as owners may benefit from stable income and the ability to increase rent. Inflation in the U.S. has risen to levels we've not seen since the 1980s. Various macro factors are to blame.

    Why commercial real estate is the best investment? ›

    Commercial real estate is a hedge against inflation. As the economy grows, and more is charged for goods and services, landowners may increase the rent they charge. Growth in the economy means that people earn more money, so they can pay more for rent.

    What is the biggest bank risk? ›

    Credit risk is the biggest risk for banks. It occurs when borrowers or counterparties fail to meet contractual obligations. An example is when borrowers default on a principal or interest payment of a loan. Defaults can occur on mortgages, credit cards, and fixed income securities.

    Which group of banking products is the highest risk? ›

    The banks will also want to know about the kind of transactions you'll be processing. Card-present transactions are lowest in risk while card-not-present (CNP) transactions get progressively riskier. Subscriptions or recurring billing are considered some of the highest risk.

    What are high risk banks? ›

    High risk banks provide merchant accounts to high risk industries. They have separate standards for approving your account and are more lenient when it comes to your industry or chargeback rates.

    What will happen when commercial real estate crashes? ›

    The market's slide will hurt the banking industry through banks' CRE lending. Property owners that lose income when their office leases expire could default or, due partly to higher interest rates, fail to refinance when their loans mature and the loan principal becomes due.

    What happens to commercial real estate in a recession? ›

    A recession can lead to decreased demand for commercial real estate, resulting in lower property values. This can create opportunities for businesses to buy properties at discounted prices.

    What leads to a banking crisis? ›

    These include credit risk (loans and others assets turn bad and ceasing to perform), liquidity risk (withdrawals exceed the available funds), and interest rate risk (rising interest rates reduce the value of bonds held by the bank, and force the bank to pay relatively more on its deposits than it receives on its loans) ...

    Why does 2024 look like trouble for commercial real estate? ›

    More than $900 billion in loans backing office buildings, retail centers, hotels, warehouses and more will come due this year — and analysts who track commercial real estate are already worried that this slice of the economy could soon threaten regional banks and municipal finances.

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