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Banks Brace for Pain as CRE Borrowers Struggle to Refinance

Banks are increasing reserves against risks.

By Erik Sherman | November 22, 2024 at 06:20 AM

Commercial real estate has undergone major stresses and changes through and after the pandemic. That’s translated to pressures and challenges ahead for lenders, says S&P Global Market Intelligence in a report about trends and opportunities shaping up for 2025.

One factor is interest rates. The Federal Reserve has cut 75 basis points from the federal funds rate between the September and November FOMC meetings. That is progress for shorter-term rates. If longer-term rates also started to fall, it could mean good news for CRE borrowers, but yields seem to be holding above the 4.3% to 4.4% range. For many properties, particularly in the “embattled” types, that may not prove enough of a reduction.

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