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Will commercial real estate hurt regional banks?
Feb 1, 2024
FT property correspondents Robert Armstrong and Joshua Oliver discuss the recent decline in shares of New York Community Bank Corp and its impact on the commercial real estate market. They explore the challenges in commercial real estate, the potential impact on regional banks, and the slow-moving nature of the sector. The hosts also have a contrasting discussion on returning to the office post-COVID-19.
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Quick takeaways
- The troubles faced by New York Community Bancorp and its exposure to commercial real estate loans highlight potential issues in the commercial real estate market, regional banks, and the broader economy.
- Surviving until 2025 is a key goal for real estate owners, banking on the interest rate cycle to lift them out of trouble, while the sector faces challenges such as falling values, high leverage, and changing office demands.
Deep dives
Troubled New York Community Bank Corp raises concerns about commercial real estate sector
Shares of New York Community Bank Corp fell 40% following losses on two real estate loans, highlighting concerns about the commercial real estate sector. The bank's losses and provision for future losses indicate potential trouble in the sector, with worries that more banks may be impacted. Commercial real estate faces challenges due to falling values, high leverage, and changing office demands. Buildings with high leverage and declining values may result in loans being worth more than the building, leading to possible defaults and economic consequences. While the likelihood of a bank run is low due to regulatory protections, the sector remains an area of concern.
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