Commercial real estate — and specifically the office sector — is under pressure as occupancy has failed to recover to pre-COVID levels and higher interest rates are putting pressure on asset valuations. That is the assessment from a new report by J.P. Morgan Private Bank whose research found:
The office sector has the worst fundamentals in commercial real estate space, while the multifamily and industrial property types are exhibiting far more strength.
Office will likely see a cycle of distress similar to the global financial crisis and early 1990s recession.
Though office buildings are a relatively small share of aggregate wealth and economic growth, the strains could further impair credit creation from smaller banks.
The report, titled Are banks vulnerable to a crisis in commercial real estate, also found that investors are particularly worried about the fundamentals because regional banks, which are facing stresses from d