Bank Contagion Fears Shake The Foundation Of Commercial Real Estate At Its Core

Senné CFO David Keiran lent his expertise to an article in Bisnow about the effects of the Silicon Valley Bank collapse and the resulting closures of other lenders. 

Roughly 80% of U.S. commercial real estate lending is provided by banks that have assets of less than $250B, Goldman Sachs economists wrote in a recent report.

David Keiran, Chief Financial Officer at Senné, states, “The effect on regional banks could be devastating if depositors decide to move their funds to stronger players like J.P. Morgan, Bank of America or Wells Fargo who are seemingly immune at present to liquidity issues… 

Depositors moving from smaller and regional banks to money center banks to secure their deposits will also reduce liquidity which will also further reduce available funds from these small and regional banks for lending to customers.”

With more lenders out of the market, less liquidity means commercial real estate values, already being called into question because of higher interest rates, will continue to be pushed downward.

“Those looking to sell anytime soon, especially those owners that are facing loan maturities, will have to offer their deals at higher cap rates to attract buyers,” Keiran wrote. “So I would expect to see a major value adjustment in the CRE sector, especially if we are in a recession.”

Read more on Bisnow.com»

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