When big US banks are worried about lending to the commercial property market, one knows things must be getting bad. Big bank executives say they are unwilling to sign off on a number of deals in commercial real estate as the sector looks overheated. For instance, the CFO of JP Morgan Chase said spreads, a proxy for returns, were “under a lot of pressure”. Big banks like JPM and Wells Fargo have been shrinking their exposure to the sector for some time. Market participants say competition in the space is so high that deals no longer provide good risk-return metrics.
FINSUM: It sounds like commercial real estate is maybe just past its peak and headed for a downturn. All of which appears in direct contrast to the residential property market.