The National Association of REALTORS® and its affiliates have come together to provide elected officials with clarity about the state of commercial real estate, which has become an increasingly stressful environment for many owners.
NAR President Kevin Sears sent a letter on behalf of NAR and commercial associations CCIM Institute, Institute of Real Estate Management, and Industrial and Office Real Estate Association to congressional committees examining the health of the commercial real estate market. In a letter to the U.S. House of Representatives Healthcare and Financial Services Subcommittee, Sears drew attention to long-term negative effects on commercial businesses, including the shift to e-commerce, changing work patterns, and looming debt problems.
Trepp's analysis of Federal Reserve data from last year found that there's an estimated $2.81 trillion in commercial loans coming due between 2023 and 2028. Much of that debt was incurred under vastly different economic conditions, including higher occupancy rates and lower interest rates. “As a result, many commercial property owners and tenants may face increased loan payments to their lenders while they are still recovering from the economic damage caused by COVID-19 and adapting to new consumer trends,” the letter said.
NAR and its affiliates are calling on financial regulators to establish a program (following precedents set in 2009, 2010, 2020 and 2022) that provides flexibility to commercial real estate lenders, which are often small or community banks, and encourages financial institutions to work carefully with borrowers on troubled debt restructurings.
At the same time, the NAR says it's important to lower unnecessary barriers to investing in the stock market and not increase taxes on risk-taking.
“The nation's financial regulators and lawmakers should consider thoughtful and flexible policies that will help this critical sector recover, rather than arbitrary requirements that will only further drive down values and put both lenders and commercial real estate borrowers at risk,” the letter said.
Sears noted that U.S. commercial real estate “contributes an estimated $2.3 trillion to the economy (9 percent of total U.S. GDP), supports more than 15 million jobs and pays $559 billion in property taxes to local governments. We look forward to working with you to develop solutions to protect this critical sector of the U.S. economy.”