CRE fears are overstated

Economic growth is powered by businesses that need real estate to build, innovate, and sell goods and services. Much of this commercial real estate is financed by banks, and some small portion of that bank-financed space is in office towers in large cities. Despite this fraction-of-a-fraction exposure, recent commentary (here and here, for example) has expressed fears that bank lending to CRE owners is building into a major problem.

In reality, banks have limited and diverse CRE exposures, CRE loans have been made prudently, underlying cash flows may be stronger than critics assume, and banks are likely to be resilient to adverse outcomes.

Fear: Banks are overexposed to downtown office buildings.

Reality: There have been several articles studying nonfarm nonresidential CRE loans that assume these properties have tenants who have switched to fully remote work policies..
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RSK: I guess they are betting on a back to office work environment.