The office vacancy rate hit 18.6 percent in the first quarter of 2023 - well above the pre-pandemic level - according to an estimate from Cushman and Wakefield, which doesn’t expect vacancy rates to stabilize until 2024. The pandemic-induced rise of remote work has hammered offices. The “best-case scenario” for the market is that a wipeout would be “isolated to a few banks that have a lot of office loan exposure,” according to Stijn Van Nieuwerburgh, a Columbia Business School professor of real estate and finance. They need to “insist that banks and other lenders appropriately hedge against the risks of a significant downturn in commercial real estate,” the Massachusetts Democrat said. Elizabeth Warren says regulators have a key role to play in heading off any crisis. White House economic adviser Jared Bernstein told a panel of lawmakers in April that the issue “is very much on our watch list” when asked about the potential for a significant downturn in the market. “I have encouraged the White House, though, that we need to do some more intervention on these regional banks right away.”
“I’m still trying to sort through some of the policy options,” said Warner, who declined to detail his ideas. we’re going to be able to simply glide through. “Right now, we have the double whammy of much higher interest rates and the commercial real estate market going through a shock post-Covid,” Sen. And the Fed itself flagged commercial real estate as an area of concern in its May Financial Stability Report, warning that “the magnitude of a correction in property values could be sizable and therefore could lead to credit losses” by banks and investors holding commercial real estate debt.
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