Finance
Small US Banks Are Increasingly at Risk in Commercial-Property Slump
- Declining values send more buildings into negative equity
- Distress threatens ‘dozens to over 300’ banks, report says
About 14% of all commercial real estate loans and 44% of loans on office buildings appear to be in “negative equity,” meaning the debt is now greater than the property value.
Photographer: David Paul Morris/BloombergThis article is for subscribers only.
Falling commercial-property values are raising solvency risks for potentially hundreds of US banks, according to a new report prepared for the National Bureau of Economic Research.
About 14% of all commercial real estate loans and 44% of loans on office buildings appear to be in “negative equity,” meaning the debt is now greater than the property value. That raises the risk borrowers won’t repay because their stakes are wiped out, according to the report.