Is the Commercial Real Estate Market a Potential Threat to the Banking System?

Executive summary:

  • The stresses in the CRE market do not appear to pose a systemic threat to the global banking system
  • One step regulators might take to lessen pressures on the system could be allowing banks to modify and then reclassify loans
  • Tighter banking regulations could lead to more opportunities for private credit investors

On May 11, Chief Investment Strategist Erik Ristuben, Senior Research Analyst Ryan Dembinsky, and Jack Fadule, Director, Investment Research, Private Markets, joined Morris Chen, portfolio manager at DoubleLine Capital, for a discussion on the commercial real estate market and its potential effects on the banking sector and the broader economy. Below is a recap of the key highlights from their conversation.

What’s happening in the CRE market?

Ristuben opened the discussion by noting that commercial real estate (CRE) debt has become a hot topic ever since March’s banking crisis, with concerns among investors that the entire market is under pressure—especially due to recent stresses among U.S. regional banks.