| Fund managers have warned that low demand for commercial real estate could cause problems for lenders. Markets such as New York and San Francisco are considered two of the most vulnerable. - According
to industry experts, the U.S.'s $5.6T commercial real estate market
could face a crisis caused by rising interest rates and low demand for
office space.
- What has made this situation even more worrying
is that regional banks, usually the main lenders for real estate
companies, have been significantly affected by a recent and impactful
crisis.
- As a result, several banks, such as Silicon Valley Bank, Signature Bank,
and First Republic, have collapsed. Silicon Valley Bank and Signature
Bank closures represent some of the largest in U.S. history.
- One
of the main issues that finance experts have highlighted is that real
estate investors have taken advantage of low-interest rates in recent
years and borrowed cheaply. Now that interest rates are rising quickly
and demand has fallen, investors are exposed and over-leveraged.
- Berkshire
Hathaway Vice Chairman Charlie Munger said that a considerable number
of real estate deals in the market are currently "bad" but added that
the situation is not comparable to the 2008 crisis.
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