The declining performance of commercial real estate threatens the financial stability of the United States

2023-05-18 14:01:00

22% expected decline in US commercial real estate

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In the midst of the dilemma of raising the US debt ceiling and hinting from time to time that America could default on its debts, only 8% of fund managers and investors believe that this crisis may generate a systemic risk crisis.
This is in the latest survey conducted by Bank of America.

On the other hand, about 50% of the managers surveyed believe that the decline in the performance of the commercial real estate sector over the past four years is what will create a financial crisis that threatens financial stability.

The “Financial Times” newspaper indicated that the share of commercial real estate from investment fund portfolios stands at the lowest level since 2008, in the latest indication of exacerbating concern about the repercussions of rising interest rates and declining demand for the sector.

The recommendations of investment fund managers regarding commercial real estate have changed in just one year, as a Bank of America survey showed that 19% of fund managers globally were recommending raising investments in this sector in April last year.

The percentage of portfolio exposure to the commercial sector was the highest in 16 years, turning things upside down and 19% of these investors reducing their exposure to commercial real estate now to the lowest level since 2008.

There were many bad descriptions by experts in the commercial real estate sector, some of whom describe it as “gloomy” and a team that considers it “troubled” or full of bad debts.

The “Financial Times” newspaper indicated that the sector in America, which is worth $ 5.6 trillion at the present time, is expected to witness a decline of 22%, as commercial real estate suffers from low rents and declining occupancy levels in the wake of the epidemic, in addition to tightening lending standards for specific categories. Commercial real estate loans in light of the uncertainty surrounding the US economy, according to what she indicated.

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