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The risks of U.S. commercial banks being overexposed to commercial real estate (CRE) have intensified as the global pandemic upended long-held economic assumptions of perpetually subdued inflation, low interest rates, and in-office work. An analysis from The Conference Board suggests that in the next two years, more than $1 trillion in CRE loans will come due, and an increasing number of banks, mostly regional and community banks, risk having insufficient capital cushions. Executives should take steps now — including examining banking relationships, extending debt maturities, and securing adequate working capital — to mitigate the potential fallout.
U.S. banks face a reckoning: Over the next two years, more than $1 trillion in commercial real estate (CRE) loans will come due, according to The Conference Board calculations using MSCI Real Assets data. Institutions with the most concentrated exposures, insufficient capital cushions, and limited lifelines from larger institutions or regulators face significant losses.
