A review of risks facing U.S. commercial real estate and banks
Research - APRIL 20, 2023

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A review of risks facing U.S. commercial real estate and banks

by Jennifer Molloy

Although financial markets have calmed since recent banking woes, market participants are concerned about other potential pressures. Given that U.S. commercial real estate and banking systems proved fragile in previous crises, an analysis by Frédérique Carrier, head of investment strategy for RBC Wealth Management in the British Isles, looks at the current vulnerabilities and the implications for the economy and investor portfolios.

Carrier writes that commercial real estate relies heavily for financing on small and midsize banks — the most stressed financial institutions. “Overall, the commercial property industry in the U.S. owes $1.9 trillion to these banks, or twice what it owes to large banks [$900 billion], according to the Mortgage Brokers Association. Small and midsize banks are heavily exposed to [commercial real estate], which accounts for as much as 43 percent of their outstanding loans.”

A sore point

In the United States, Car

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