Remote Work Triggers Looming Bank Solvency Crisis as Commercial Real Estate Unravels
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Many US banks face solvency issues as $5 trillion in commercial real estate debt needs refinancing into a hostile lending environment. Up to 1,000 banks may disappear.
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Falling rents and property values have left nearly half of office buildings in negative equity. Owners are defaulting on loans or negotiating discounts.
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The crisis stems from hybrid remote work, which has kept office occupancy rates below 50%. The loss in value could top $650 billion in New York City alone.
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Small and mid-sized banks have the heaviest exposure, with commercial real estate loans equal to 180% of their capital on average. Failures could trigger bank runs.
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While not yet systemic, comparisons are made to the early 1990s savings and loan crisis which saw 747 bank failures, rather than the 2008 financial crisis.