U.S.: A 2 trillion-dollar debt “time bomb” Threat to Banks in Commercial Real Estate

Serious risks are faced by American banks due to their exposure to $2 trillion of trade which will become due over the next three years, according to the real estate consulting and brokering company, Newmark. Newmark announced that the estimated US $2 trillion worth of commercial property debt ending between this year and 2026 should be refinanced at much higher rates. According to US Mortgage Banks’ data, $929 billion of commercial property debt will have to be repaid or refinanced only this year. The company estimates that $670 billion of loans that expire until 2026 are “potentially problematic”. Real estate investors have been hit by rising interest rates, which has increased their funding costs and pushed down property values. The main problems in the American commercial real estate market are offices and apartment buildings, which have overdeveloped in the years of cheap debt but are now affected by the highest operating costs. Since the rise of teleworking during the pandemic, offices in the U.S. are “sub-arranged”, according to Newmark analysts, with too many unwanted old buildings remaining, and with the appreciation to say that only in New York should be “demated” 50 million square feet of office. Pressures on the real estate market have put pressure on banks that provided cheap loans in the boom years. Selling loans, sometimes on sale, is a solution for some who have too many properties in their portfolios. For buyers, including wealthy private and private funds, these sales are an opportunity to seize loans or acquire control of the underlying assets at reduced prices