Empty Office Space Continues to Remain an Area of Bank Stress
Although not the level of bank stress experience when Silicon Valley Bank and Signature Bank collapsed last year, Federal Reserve officials said that there remain “pockets of risks in the system,” and although the “overall banking system was ‘sound and resilient,’ empty office space remains an area of stress.” It is anticipated that “bad commercial real estate loans will probably lead to some bank failures, though they don’t pose a risk to the financial system.” Paralleling the situation to a “very slow-moving train,” the Fed remains focused on “lenders that have exposure to office space in areas where significant price declines are expected,” adding that “refinancing deals will play out in the next few years.”