• Login
NORVANREPORTS.COM |  Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World
  • Home
  • News
    • General
    • Political
  • Economy
  • Business
    • Agribusiness
    • Aviation
    • Banking & Finance
    • Energy
    • Insurance
    • Manufacturing
    • Markets
    • Maritime
    • Real Estate
    • Tourism
    • Transport
  • Technology
    • Telecom
    • Cyber-security
    • Cryptocurrency
    • Tech-guide
    • Social Media
  • Features
    • Interviews
    • Opinions
  • Reports
    • Banking/Finance
    • Insurance
    • Budgets
    • GDP
    • Inflation
    • Central Bank
    • Sec/Gse
  • Lifestyle
    • Sports
    • Entertainment
    • Travel
    • Environment
    • Weather
  • NRTV
    • Audio
    • Video
No Result
View All Result
No Result
View All Result
NORVANREPORTS.COM |  Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World
No Result
View All Result
Home Business

US commercial real estate remains a risk despite investor hopes for soft landing

2 years ago
in Business, Features, highlights, Home, home-news, latest News, Real Estate
2 min read
0 0
0
84
VIEWS
Share on FacebookShare on TwitterShare on Linkedin

US commercial real estate remains a risk despite investor hopes for soft landing

The commercial real estate sector has been under intense pressure globally as interest rates have risen over the past couple of years. In the United States, with the largest commercial property market in the world, prices have tumbled by 11 percent since the Federal Reserve started raising interest rates in March 2022, erasing the gains of the preceding two years.

Higher borrowing costs tend to dampen commercial property prices directly by making investments in the sector more expensive, but also indirectly by slowing economic activity and reducing the demand for such properties. Nevertheless, the sharp decline in prices during the current US monetary policy tightening cycle is striking. As the Chart of the Week shows, contrary to the current policy cycle, commercial property prices remained generally stable or saw milder losses during past Fed rate hikes. Some of the earlier rate hikes, though, such as in 2004-06, were subsequently followed by a recession during which commercial property prices recorded notable declines as demand fell.

Part of this divergence in price behavior between the recent and past monetary policy tightening cycles may be attributed to the steep pace of monetary policy tightening this time around, a factor that has contributed to the sharp increase in mortgage rates and commercial mortgage-backed securities spreads. It has also notably slowed private equity fundraising—an important source of financing for the sector in recent years, as noted in our recent Global Financial Stability Report.

Notwithstanding recent declines in US Treasury yields, higher financing costs since the beginning of the tightening cycle and tumbling property prices have resulted in rising losses on commercial real estate loans. Stricter lending standards by US banks have further restricted funding availability. For example, about two-thirds of US banks recently reported a tightening in lending standards for commercial construction and land development loans, up from less than 5 percent early last year.

The effects of tightening financial conditions on commercial property prices over the past two years have been compounded by trends catalyzed by the pandemic, such as teleworking and e-commerce, that have led to a drastically lower demand for office and retail buildings and pushed vacancy rates higher. Indeed, prices have slumped in these segments, and delinquency rates on loans backed by these properties have risen in this cycle of monetary policy tightening.

These challenges are particularly daunting as high volumes of refinancing are coming due. According to the Mortgage Bankers Association, an estimated $1.2 trillion of commercial real estate debt in the United States is maturing in the next two years. Around 25 percent of that is loans to the office and retail segments, most of which is held by banks and commercial mortgage-backed securities.

RelatedPosts

Parliament Adjourns Sine Die After Intense Legislative Session Marked by Reform Calls and Tributes

GACL Terminates Evatex Revenue Assurance Contract Amid OSP Probe

Cyber Security Authority Flags Rising Mobile Data Scam, Cautions Public

Prospects for the sector remain challenging, even as Fed officials signal interest rate cuts this year and investors grow more optimistic about a soft landing for the economy. Financial intermediaries and investors with a significant exposure to commercial real estate face heightened asset quality risks. Smaller and regional US banks are particularly vulnerable as they are almost five times more exposed to the sector than larger banks. The risks posed by the commercial property sector are also relevant for other regions, for example, in Europe, as many of the same factors are at play as in the US.

Financial supervisors must continue to be vigilant. Rising delinquencies and defaults in the sector could restrict lending and trigger a vicious cycle of tighter funding conditions, falling commercial property prices, and losses for financial intermediaries with adverse spillovers to the rest of the economy. Ongoing monitoring and management of risks related to the sector will be important to mitigate potential risks to macro-financial stability.

No Result
View All Result

Highlights

Gov’t Reopens Talks With PayPal to Restore Full Service Access in Ghana

Financial Sector Assets up 34.6% in 2024 to GHS 525.59 Billion

Banking Sector Soundness Remains Robust in 2024 Amid Strong Profitability, Adequate Capital Buffers

Sha’Carri Richardson Withdraws from US Trials Following Arrest

From Singuluma to El Kaabi: Can CHAN 2024 Unleash the Next Hat-trick Hero?

Ghana to Welcome King’s Baton Relay on August 8 Ahead of 2026 Commonwealth Games

Trending

Features

Parliament Adjourns Sine Die After Intense Legislative Session Marked by Reform Calls and Tributes

August 2, 2025

Parliament Adjourns Sine Die After Intense Legislative Session Marked by Reform Calls and Tributes Parliament has adjourned...

GACL Terminates Evatex Revenue Assurance Contract Amid OSP Probe

August 2, 2025

Cyber Security Authority Flags Rising Mobile Data Scam, Cautions Public

August 2, 2025

Gov’t Reopens Talks With PayPal to Restore Full Service Access in Ghana

August 2, 2025
Bank of Ghana

Financial Sector Assets up 34.6% in 2024 to GHS 525.59 Billion

August 2, 2025

Who we are?

NORVANREPORTS.COM |  Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World

NorvanReports is a unique data, business, and financial portal aimed at providing accurate, impartial reporting of business news on Ghana, Africa, and around the world from a truly independent reporting and analysis point of view.

© 2020 Norvanreports – credible news platform.
L: Hse #4 3rd Okle Link, Baatsonaa – Accra-Ghana T:+233-(0)26 451 1013 E: news@norvanreports.com info@norvanreports.com
All rights reserved we display professionalism at all stages of publications

No Result
View All Result
  • Home
  • Business
    • Agribusiness
    • Aviation
    • Energy
    • Insurance
    • Manufacturing
    • Real Estate
    • Maritime
    • Tourism
    • Transport
    • Banking & Finance
    • Trade
    • Markets
  • Economy
  • Reports
  • Technology
    • Cryptocurrency
    • Cyber-security
    • Social Media
    • Tech-guide
    • Telecom
  • Features
    • Interviews
    • Opinions
  • Lifestyle
    • Entertainment
    • Sports
    • Travel
    • Environment
    • Weather
  • NRTV
    • Audio
    • Video

Welcome Back!

Login to your account below

Forgotten Password?

Create New Account!

Fill the forms bellow to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
NORVANREPORTS.COM | Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World
This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it.