American banks are growing increasingly concerned about declining commercial property valuations and the risk this presents to their balance sheets, according to senior industry figures. The pandemic and rising interest rates have hit office valuations in particular. Some financial executives have tried to calm investors by pointing to the fact that real estate holdings are broadly distributed among banks and other financial institutions. Commercial real estate accounts for about 40% of smaller banks’ total lending compared to around 13% among larger lenders. Wells Fargo reported that its non-performing commercial real estate loans had risen by almost 50% since December to $1.5bn. Meanwhile, investor concerns over commercial real estate are growing, with almost half of those surveyed by Bank of America stating that it is the sector most likely to experience a systemic credit event.
