Banks Offload Commercial Real Estate Loans Ahead of Expected Losses

Major US banks are quietly selling their exposure to the troubled commercial real estate market, according to a recent report by the New York Times.

Dumping Loans to Cut Losses

Banks such as Goldman Sachs, Citigroup, and Capital One have recently sold portions of large commercial real estate loans, signaling a shift in strategy. These loans are typically backed by office buildings in major cities like New York, San Francisco, and Boston.

Impact of Work-from-Home Culture

The commercial real estate market has been hit hard by the rise of remote work, leading to a decline in demand for office space. As a result, many property owners are facing difficulties in making mortgage payments.

Inevitable Losses

Industry experts believe that these loan sales indicate that banks are recognizing the inevitability of losses in the commercial real estate sector. This could lead to a decline in bank earnings in the coming months.

Foreclosures on the Rise

According to data from ATTOM, commercial real estate foreclosures have surged by 117% year-over-year nationwide. California has been particularly hard-hit, with a 405% increase in foreclosures compared to March 2023.