All eyes are on commercial real estate (CRE), following stress in the financial sector. It’s clear that the failures of both Silicon Valley Bank and Signature Bank will result in stricter lending standards, amid a period of already tightened credit. However, it’s unclear where the commercial real estate market stands—some suggest it’s the next shoe to drop, others claim only one sector is really at risk.
Unlike Morgan Stanley’s almost apocalyptic tone, with analysts forecasting a “peak-to-trough CRE price decline of as much as 40%, worse than in the Great Financial Crisis,” Bank of America seems to suggest that commercial real estate will hold steady, while echoing the office sector’s diminishing value, in a research note published last week.
