The urban office real estate niche of the commercial real estate market is increasingly distressed owing to the work-from-home trend escalated by Covid. But the problem is contained to the office districts of big cities, and we expect the fallout to be contained too: Sellers of distressed properties will take losses but find buyers, exposed banks will further increase loan loss provisions, increased M&A activity among small banks may result; but the problem won’t domino into a crisis of the banking system or the economy at large. … We detail why with our analysis of data from the Fed.
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