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Commercial Real Estate in Turmoil: Navigating Tough Times Ahead
The recent stress in the banking sector has raised concerns about its potential impact on the commercial real estate [CRE] industry, which heavily relies on bank lending. Small- and medium-sized banks account for 80% of all commercial real estate lending, and regional banks have an outsized exposure to office loans. The office property sector faces post-pandemic headwinds, including declining occupancy rates, falling appraisal values, and rising defaults. The combination of higher interest rates and the risk of dwindling credit availability is forcing office landlords to reckon with a pre-existing occupancy problem.