The office vacancy rate is rose sharply According to data from the Treasury Department’s Financial Stability Oversight Council (FSOC), it hit a record high of 13.1% last year due to the pandemic, after steadily declining for the previous 10 years, analysis firm Coster said.
At the same time, delinquency rates for commercial mortgage-backed securities have also increased. on an upward trend However, in recent months it remains well below the highs reached in the aftermath of the pandemic and the 2008 financial crisis.
“The decline in demand for office real estate may take some time to stabilize as tenants make remote work decisions and adjust the amount of space they require,” according to FSOC’s latest report. “Furthermore, a delayed return to office centers in densely populated urban areas could reduce demand for office properties there, as well as nearby retail space.”
Federal Reserve Chairman Jerome Powell delivered a similar message to the Senate Banking Committee last week, declaring: There will be failures too Among small and medium-sized regional banks that provide commercial real estate financing.
“I think this is an issue that we’re going to be dealing with for many more years. There will also be bank failures,” he said.
“This is not a primary problem for any very large bank. It’s the small and medium-sized banks that are having these problems. We’re working with them. We’re getting through it. It’s manageable. I think that’s the word I want to use,” Powell said.
Investors are follow his warning But they take the sector at a discount, arguing that the losses are unlikely to result in a traditional liquidity crisis like the one that brought down Silicon Valley Bank and Signature Bank last year.
“I think Chairman Powell’s statement was a little too simplistic,” Daniel Alpert, managing partner at Westwood Capital, told The Hill. “There’s going to be chaos. I believe how these banks resolve with the help of government and outside capital is going to be very different than what we saw with the three banks. [last year] And certainly the same as we’ve seen in other crises. ”
The Hill’s Tobias Burns has more information.
