According to a report from the Financial Times, fund managers are cautioning banks about the possibility of mortgage defaults in the $5.6 trillion U.S. commercial real estate industry, particularly in major cities.
Anne Walsh, the Chief Investment Officer of Guggeinheim Partners, believes that a real estate recession is on the horizon, but not for the entire market. Walsh predicts that the most severe consequences will be concentrated in the largest urban centers, such as New York and San Francisco, where many offices remain unoccupied.
The issue of finding tenants for empty office buildings has worsened due to rising interest rates and falling prices. Additionally, the recent failures of regional banks with significant commercial mortgage holdings, including Silicon Valley Bank, Signature Bank, and First Republic, have brought attention to the problem.