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Banking’s next threat? It might be commercial real estate

If the saga at Silicon Valley Bank hastens the arrival of the next recession, expect to see more big developments go into default sooner rather than later.
Robert Burgess
Mar 14, 2023 – 2.16pm


If market participants are wringing their hands over the potential fallout from the collapse of Silicon Valley Bank, just wait until they look at the banking industry’s exposure to the rapidly weakening commercial real estate sector.

It seems as if every few days brings news of some big property going into default in the US. Within the past few weeks, an office landlord controlled by Pacific Investment Management defaulted on about $US1.7 billion ($2.6 billion) of mortgage notes on seven buildings in places such as San Francisco, Boston and New York.