Collapse of the commercial real estate sector will cost US banks $250 billion

The commercial and office real estate sector in the US is facing significant challenges due to the continued trend of remote work that started during the pandemic. This situation is expected to result in a $250 billion loss for the country’s banks, as reported by Business Insider.

According to Kyle Bass, founder of Hayman Capital Management, the commercial real estate market could lead to major losses for the country’s banks since this sector is directly linked to them.

Office spaces continue to experience low occupancy levels due to remote and hybrid work arrangements.

Banks could potentially lose $250 billion due to investments in commercial offices, which accounts for around 10% of their total capital, amounting to $2 trillion.

The high interest rate also puts pressure on commercial real estate, which affects landlords who will need to refinance their loans in the near future.

While many commercial real estate owners have benefited from the low interest rate over the past decade, the rise in rates and decline in property value could pose a double blow for both owners and banks as loan repayment deadlines approach.