Originally published on April 28, 2023, by Henry Simpson for US Today.
US banks are increasingly concerned about falling commercial property valuations and the risk they pose to lenders’ balance sheets, senior officials said this week.
Office valuations, in particular, have been hit by rising interest rates and many employees’ preference to work from home since the coronavirus pandemic.
However, financial managers tried to reassure investors that they did not anticipate significant systemic risk as holdings are broadly spread across banks and other institutions.
“What happens to commercial real estate, especially offices,” is State Street’s top concern, Ron O’Hanley, the US custodian’s chief executive officer, said this week. Not all properties are equally affected, he added: “Class A holds up. Rents may be down, but they’re not in trouble. Class B and C are definitely.”