While we’re talking about things that have changed, Covid made “work from home” a permanent aspect of the workplace and company culture. But the impact of this development may well spill over into the economy through office buildings as loans secured by them become due and can’t be renewed,/refinanced because of expiring leases and falling occupancy drives down their collateral value.
As a result, there could be a “Doom Loop”: “Questions about the health of banks with sizable exposures to commercial real estate loans cause customers to pull deposits. That forces lenders to demand repayment — exacerbating the sector’s downturn and further damaging the banks’ financial position. That triggers more deposit outflows in a “vicious cycle.”
Credit tightens and further impacts the economy. In short, this article warns that American offices are half empty. That could be the next big risk for banks.
Note: I posted a link to another article six weeks ago that shared the same concerns: “Office landlords are giving up. ”
