If market participants are wringing their hands over the potential fallout from the collapse of Silicon Valley Bank, just wait until they look at the banking industry's exposure to the rapidly weakening commercial real estate sector.
It seems as if every few days brings news of some big property going into default. Within the past few weeks, an office landlord controlled by Pacific Investment Management defaulted on about $1.7 billion of mortgage notes on seven buildings in places such as San Francisco, Boston and New York. Before that, a Brookfield business defaulted on loans tied to two Los Angeles office towers. A $1.2 billion mortgage on a San Francisco complex co-owned by former president Donald Trump and Vornado Realty Trust has showed up on a watch list of loans that may be in jeopardy.
