Originally posted on Quora May 25, 2023
Sources: Charlie Munger Warns of Trouble for Commerical Property Market
Morgan Stanley Analysts Say Commercial Real Estate is Headed for Crisis Worse Than 2008
U.S. Banks hold some $3 trillion in commercial property loans, nearly half of which is up for refinancing in the next couple of years. With 50% of office spaces still sitting vacant since the pandemic and rising interest rates making refinancing less desirable the default rate on commercial mortgages is expected to surge. The delinquency has already risen 44% in the past two years and the default rate has surged to a 14 year (i.e. since the last great recession) of 5.2% with office buildings accounting for nearly half of defaulted MBS debt.