'"Concerns of Default Within 3 Years" $900 Trillion US Commercial Real Estate Loans'

Newmark CEO in the US... "Increasing Pressure on Banks"

The scale of U.S. commercial real estate loans maturing within three years is estimated to reach $2 trillion (approximately 2,708 trillion KRW), with $670 billion (approximately 907 trillion KRW) of that amount potentially at risk of default, according to an analysis.

On the 1st (local time), Barry Gosin, CEO of U.S. real estate services firm Newmark, stated, "Banks will be under pressure," highlighting this concern.

According to Newmark, commercial real estate loans maturing from this year through 2026 total $2 trillion. Borrowers must either repay the loans to banks or bear significantly higher borrowing costs to extend or refinance their loans. The Mortgage Bankers Association (MBA) estimates that commercial real estate loans maturing this year alone will amount to $929 billion.

Newmark reports that one-third of the loans maturing within three years, totaling $670 billion, are potentially problematic. This is due to the rise in U.S. office vacancy rates caused by the COVID-19 pandemic and the spread of remote work, combined with high interest rates leading to a sharp decline in real estate values. As investors face soaring borrowing costs and the real estate market downturn makes sales difficult, the number of borrowers unable to repay loans is increasing, potentially spreading bank defaults. According to MSCI, U.S. commercial real estate transaction volume fell by 51% last year.

CEO Gosin diagnosed, "Everyone who invested in office real estate over the past five years will face problems," adding, "We are at the point where the impact of the loan maturity wall is beginning." He further explained, "Some of these will remain underwater, some will be snorkeling, and some will be recapitalized with more assets."

He also emphasized, "Banks need to find other ways to securitize loans and reduce their exposure to commercial real estate," urging, "They should sell debt or transfer risk and halt new lending in the commercial real estate sector."

However, he forecasted that the commercial real estate market will begin to recover starting this year.

CEO Gosin analyzed, "We have hit the bottom, and 2024 will be the year of turning from the bottom," adding, "Activity will moderately increase, but it is not yet at full speed."