More than the next few years, a wave of commercial real estate loan failures could threaten America’s currently-weakened financial technique. But some elements of the structure of the commercial real estate markets, like the heavy reliance on CMBS (themselves backed in some cases by CDS) and the fact that at least a single of the nation’s largest financial institutions holds a substantial portfolio of issue loans, mean that the potential for a larger impact is also present.
Although numerous analysts and Treasury officials think that the commercial real estate issue is one particular that the economy can handle through, and analysts believe that the existing condition of commercial real estate, in isolation, does not pose a systemic risk to the banking system, rising delinquency rates foreshadow continuing deterioration in the commercial real estate market place.
The commercial real estate industry is currently experiencing considerable difficulty for two distinct causes. To …