The U.S. real estate sector has been under pressure by the Federal Reserve continuous interest rate increase, especially commercial real estate, after the shift from in-office work during the pandemic, according to Reuters on Friday.
There has been rising concerns about potential systemic problems in the real estate finance market, warned an executive serving on the board overseeing the New York Federal Reserve.
Commercial real estate debt worth $1.5 trillion is maturing in the next three years. This debt was financed when base interest rates were almost zero and needs to be refinanced with higher rates, lower values and a less liquefied market, said RXR CEO, Scott Rechler on Wednesday.
“I’m joined with the Real Estate Roundtable in calling for a program that provides lenders the leeway and the flexibility from regulators to work with borrowers to develop responsible, constructive refinancing plans,” Rechler added.
The concerns come amidst crises in the banking sector and the regional banks, which is over three quarters of real estate lending and will be putting more pressure on local governments that depend on property taxes to fund their operations.
The Fed decided not to raise its short term rate target on Wednesday, following the collapse of Silicon Valley Bank and Signature Bank crisis.
