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What Commercial Real Estate Stress Means for Banks and Bond Funds

Apr 10, 2023

Jim Costello, chief economist for real assets at MSCI, discusses the intricate connections between regional banks and the struggling commercial real estate market. He highlights risks of defaults and refinancing challenges, drawing parallels to the 2008 financial crisis. The shift from traditional bank loans to more flexible funding sources is explored, alongside the impact of remote work on office occupancy. Costello emphasizes the need for strategic repositioning of properties and adaptive strategies in light of rising interest rates and regulatory hurdles.

47:42

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Episode guests

Jim Costello

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Episode notes

Intro

2min

Commercial Real Estate and Banking Concerns

8min

Navigating Commercial Real Estate Financing: Banks, Regulations, and Challenges

5min

Evolving Real Estate Financing

7min

Income Stress in Commercial Real Estate

9min

Navigating Challenges in Commercial Real Estate

18min

Navigating the Challenges of Commercial Real Estate Stress

2min

In the last month or so, two macro risks have become top of mind for investors. One is the stability of regional banks. The other is the weakness in the commercial real estate market. On some level, they're separate stories, but they're also linked, since regional banks tend to do more commercial real estate lending than larger, national banks. Of course, the links are complicated. CRE is not a monolith — and banks are just one source of financing for CRE projects, alongside private credit funds, insurance companies and other sources of capital. On this episode of the podcast, we speak with Jim Costello, chief economist for real assets at MSCI, about what to watch for.

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