Commercial Real Estate Crisis May Rival '90s Disaster

By Kevin Spak,  Newser Staff
Posted Mar 26, 2009 11:00 AM CDT
In this Nov. 17, 2005 file photo, sunlight reflects off the John Hancock Tower onto a statue outside the Boston Public Library. The tower is being sold in a foreclosure auction.   (AP Photo/Michael Dwyer, file)
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(Newser) – Commercial real-estate borrowers are defaulting on their loans at an ever-faster pace, and experts now believe the crisis could match or exceed the early-1990s slump, the Wall Street Journal reports. That catastrophe killed off 1,000 banks and savings institutions, with lenders taking $48.5 billion in charges. This time, one firm estimates, as much as $250 billion could be lost, resulting in more than 700 bank failures.

Since September, the delinquency rate on about $700 billion in securitized commercial loans has more than doubled, to 1.8%. That’s a bit shy of the ‘90s rate—though not bad compared to home delinquencies. “In just seven months, we've gone from the best of times to the worst of times,” said Deutsche Bank’s head of commercial mortgage securities.