Property Type and Vintage Matter Most in Assessing CRE Loan Risks

Since the downturn in 2022, there’s been a tendency to view commercial real estate and lenders as a single entity, but a recent MSCI report highlights that losses vary based on property types and loan origination timing.

For example, borrowers with long-term loans from 2015 likely have options to refinance due to prior price growth, while those who took short-term loans in 2022 face challenges when it comes time to refinance.

The report emphasizes that decision-making is often influenced by past experiences, but it cautions against using previous downturns as a guide for the current situation. Each downturn has unique conditions that must be considered.

MSCI analyzed over 6,400 lenders and assessed collateral values, noting that the current market is less concentrated than in past crises, which has contributed to a lack of expected distress in the market.

Although fundamental stresses exist—such as outdated office and retail spaces—many industrial properties still hold unrealized gains. Distressed assets are primarily being acquired by local operators familiar with the market rather than distant investors.

 

Source:  GlobeSt.