Small banks look out, here comes the commercial real estate avalanche
A tidal wave of subprime home and condo mortgages gone bad came close to toppling some of our biggest banks in the days and weeks after September 2008.
Now commercial real estate is increasingly looming large as the economy’s new problem child.
And the nation’s smaller banks, which Massachusetts has its share and then some, stands squarely in the path of a potential avalanche of commercial real estate loan defaults, a new reports finds.
An array of smaller banks could be hit with losses on commercial real estate loans totaling more than $150 billion, Moody’s Investors Service reports.
These banks, in turn, now hold more than 50 percent of all the commercial real estate loans across the country.
It wasn’t too long ago that our smaller, community based banks were crowing about winning back a share of the commercial real estate market after years of losing out to an array of Wall Street players, many now defunct.
I guess they crowed too soon.
Compounding the pain, Standard & Poor’s warns the worst is not over for the commercial real estate market, with falling rents and a rising tide of empty space pushing more tower owners into default.
Ouch!