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Equities Lead Asset Classes as CRE Valuations Decline Sharply

CRE is the fourth largest asset class in the U.S.

By Erik Sherman | January 17, 2025 at 07:12 AM

The Federal Reserve’s biannual Financial Stability Report offers valuable insights into commercial real estate and its relative size compared to other asset types, which Trepp has analyzed. The report employs a four-part monitoring framework to assess the financial system’s vulnerabilities and potential shocks.

The framework first examines valuation pressures, which occur when asset prices are high relative to economic fundamentals and historical norms. Trepp specifically highlighted equities, corporate debt, and residential real estate as areas of concern in this regard. Next, it considers borrowing risks, noting that while business leverage remains high and household debt moderate, auto and credit card delinquencies have increased compared to pre-pandemic levels.

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