US: Economy at Risk as Office Building Owners Struggle to Repay $117 Billion in Commercial Mortgages Due This Year
by Karen Faulkner, Worthy News Correspondent
(Worthy News) – Financial analysts are concerned the US economy could be at risk in 2024 as $117 billion worth of commercial mortgages taken on office buildings ten years ago, when interest rates were far lower, are coming due for repayment or refinancing this year.
Economists last month discovered that 40% of office loans on bank balance sheets were in trouble, with owners now owing more than their property is worth, the Daily Mail reported.
In a statement to the Financial Times, John Duncan, head of real estate finance practice at law firm Polsinelli noted: “It’s going to be a problem to get some of these refinancings done. We’re seeing deals where even sophisticated borrowers are calling it a day and asking their lenders whether they would like to take the keys.”
Moreover, the Financial Times has noted that smaller regional banks which loaned money to buy these buildings may themselves be in trouble if the loans default as “they are not big enough to handle the losses.”
“The expected losses at this point are on a much smaller scale than during the 2008 housing crisis,” the FT noted in its report. “But soured loans could cause billions in losses for investors, wipe out some property developers … and lead to forced sales in the already struggling office market,” the FT added.
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