With $3.1 trillion in commercial real estate loans outstanding, and the office sector beset by record-high vacancies, landlords facing higher interest rates as they seek to refinance loans, there are reasons to think the road ahead may be rocky for the commercial real estate industry and banks that depend on it. However, credit in has performed well until now and it is far from clear that US credit issues spreading outward from real estate are likely.
Kevin Fagan of Moody’s Analytics believes lending issues will be contained due to three-fourths of debt generating enough income to pass refinancing standards without major changes; delinquencies remaining lower than pre-pandemic; and market conditions being fine today but could become challenging over two or three years for some properties. Alexander Yokum of CFRA Research also noted any credit metric is still stronger than pre-pandemic levels.
