Wednesday, September 27, 2023
  • Login
CEO North America
  • Home
  • News
    • Business
    • Entrepreneur
    • Industry
    • Innovation
    • Management & Leadership
  • CEO Interviews
  • Opinion
  • Technology
  • Environment
  • CEO Life
    • Art & Culture
    • Food
    • Health
    • Travel
No Result
View All Result
  • Home
  • News
    • Business
    • Entrepreneur
    • Industry
    • Innovation
    • Management & Leadership
  • CEO Interviews
  • Opinion
  • Technology
  • Environment
  • CEO Life
    • Art & Culture
    • Food
    • Health
    • Travel
No Result
View All Result
CEO North America
No Result
View All Result

US commercial real estate prices fall for first time since 2011

in News
Foreign investors have returned to us real estate, but not where they traditionally went
Share on LinkedinShare on WhatsApp

US commercial real estate prices fell in the first quarter for the first time in more than a decade, according to Moody’s Analytics, heightening the risk of more financial stress in the banking industry.

The less than 1% decline was led by drops in multifamily residences and office buildings, data culled by Moody’s from courthouse records of transactions showed.

“Lots more price declines are coming,” Mark Zandi, Moody’s Analytics chief economist, said.

The danger is that will compound the difficulties confronting many banks at a time when they are fighting to retain deposits in the face of a steep rise in interest rates over the past year.

Excluding farms and residential properties, banks accounted for more than 60% of the $3.6 trillion in commercial real estate loans outstanding in the fourth quarter of 2022, with smaller institutions particularly exposed, according to the Federal Reserve’s semi-annual Financial Stability Report published last week.

“The magnitude of a correction in property values could be sizable and therefore could lead to credit losses” at banks, the report said.

Fed Vice Chair for Supervision Michael Barr told lawmakers on Tuesday that supervisors have increased their oversight of financial institutions with significant exposure to the sector. “We’re looking quite carefully at commercial real estate risks,” he said.

The price declines seen so far have been more marked for higher-priced properties, according to commercial property company CoStar Group. Its value-weighted price index has fallen for eight straight months and in March stood 5.2% lower than a year ago.

Transactions though have been limited in a market still coping with the aftershocks of the pandemic.

The rise in employees working from home has driven some downtown retailers and restaurants out of business and forced owners of office buildings to reduce rents to retain tenants or to sell all together.

“Regional and community banks currently account for a disproportionately large share of office real estate lending. Further consolidation of the banking industry may prove to be the solution that allows the banking industry at-large to work out problem loans,” economist Stuart Paul said.

Post Brothers recently bought a Washington office building that went for $92.5 million in the fall of 2019 for $67 million, while Clarion Partners is offering a San Francisco office tower for roughly half of what it paid around a decade ago.

Banks held more than $700 billion in loans on office buildings and downtown retailers in the fourth quarter of last year, according to the Fed. More than $500 billion of that was extended by smaller lenders.

Lending officers at banks told the Fed that they further tightened credit standards on commercial real estate loans in the first quarter.

Paul Ashworth, chief North America economist for Capital Economics, sees the risk of a “doom loop” developing, with a pull-back in lending by banks leading to a steeper drop in commercial real estate prices, in turn prompting even further cuts in credit.

One potential bright spot: The big run-up in prices in past years has left many borrowers with substantial equity cushions in the properties they own. That reduces the dangers of defaults and limits the potential losses for lenders.

The loan-to-value ratio of mortgages backed by office buildings and downtown retail properties was in the range of 50% to 60% on average at the end of last year for credit extended by bigger banks, based on data collected by the Fed.

“Delinquencies and defaults will rise, but I don’t think we’ll see a lot of forced sales,” Zandi said.

He forecasts prices dropping about 10%, assuming the US skirts a recession. If it doesn’t, the declines could get a lot worse.

“We’re on a razor’s edge here,” he said.

By Rich Miller / Bloomberg

Tags: BanksReal estateUnited States

Related Posts

S&p 500, nasdaq end four-day loss streak
Business

S&P 500, Nasdaq end four-day loss streak

Costco rolls out online healthcare services
Innovation

Costco rolls out online healthcare services

Amazon deploys $4 billion into ai company
Business

Amazon deploys $4 billion into AI company

Credit card companies continue racking up losses
Industry

Credit card companies continue racking up losses

Federal reserve to lay off hundreds of workers
Innovation

Federal Reserve to lay off hundreds of workers

Mcdonalds hikes up franchising royalty fees
Business

McDonalds hikes up franchising royalty fees

Hollywood studios reaches tentative deal with  wga
Industry

Hollywood studios reaches tentative deal with WGA

Philip morris weighs selling stakes in pharmaceutical sector
Business

Philip Morris weighs selling stakes in pharmaceutical sector

Treasury yield hits 15-year high
Industry

Treasury yield hits 15-year high

Cisco to acquire splunk for $28 billion
Business

Cisco to acquire Splunk for $28 billion

No Result
View All Result

Recent Posts

  • Lego nixes plans for recycled bricks
  • ChatGPT now offers voice chatbot
  • Consumers still spending on in-demand items
  • S&P 500, Nasdaq end four-day loss streak
  • Blue Origin taps ex Amazon exec as CEO

Recent Comments

  • Juul Unveils Cutting-Edge Vaping Tech: Navigating FDA Uncertainties – iStreetPark Blog on Juul hopes FDA won’t ban its new high-tech vape
  • CEO North America, August - September 2023 - CEO North America on Interviews – CEO North America, October – November 2022
  • CEO North America, August - September 2023 - CEO North America on CEO North America, December 2022 – January 2023
  • CEO North America, August - September 2023 - CEO North America on Why Tech Companies Are Moving to Texas and Florida
  • CEO North America, August - September 2023 - CEO North America on CEO North America, February 2023 – March 2023

Archives

Categories

  • Art & Culture
  • Business
  • CEO Interviews
  • CEO Life
  • Editor´s Choice
  • Entrepreneur
  • Environment
  • Food
  • Health
  • Highlights
  • Industry
  • Innovation
  • Issues
  • Management & Leadership
  • News
  • Opinion
  • PrimeZone
  • Printed Version
  • Technology
  • Travel
  • Uncategorized

Meta

  • Log in
  • Entries feed
  • Comments feed
  • WordPress.org

  • CONTACT
  • GENERAL ENQUIRIES
  • ADVERTISING
  • MEDIA KIT
  • DIRECTORY
  • TERMS AND CONDITIONS

Editorials – stuart.james@ceo-na.com

Advertising – media@ceo-na.com

NEW YORK

110 Wall St.,
3rd Floor
New York, NY.
10005
USA
+1 212 432 5800

 

MEXICO CITY

Paseo de la Reforma 296,
Floor 38
Mexico City
06600
MEXICO

HOUSTON

1201 Fannin St.
Suite 262
Houston, TX
77002
USA

  • CONTACT
  • GENERAL ENQUIRIES
  • ADVERTISING
  • MEDIA KIT
  • DIRECTORY
  • TERMS AND CONDITIONS

Editorials –
stuart.james@ceo-na.com

Advertising –
media@ceo-na.com

NEW YORK

110 Wall St.,
3rd Floor
New York, NY.
10005
USA
+1 212 432 5800

MEXICO CITY

Paseo de la Reforma 296,
Floor 38
Mexico City
06600
MEXICO

HOUSTON

1201 Fannin St.
Suite 262
Houston, TX
77002
USA

CEO North America © 2022 - Sitemap

No Result
View All Result
  • Home
  • News
    • Business
    • Entrepreneur
    • Industry
    • Innovation
    • Management & Leadership
  • CEO Interviews
  • Opinion
  • Technology
  • Environment
  • CEO Life
    • Art & Culture
    • Food
    • Health
    • Travel

© 2023 JNews - Premium WordPress news & magazine theme by Jegtheme.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In

Warning: array_sum() expects parameter 1 to be array, null given in /home/ceonacom/public_html/wp-content/plugins/jnews-social-share/class.jnews-social-background-process.php on line 111