Excerpt from Dallas Fed “Economic Letter.”
In short, tougher times appear to lie ahead. Worsening macroeconomic conditions, particularly in the retail and other service sectors, are hurting CRE [Commercial Real Estate] fundamentals. Meanwhile the intensification of the credit crunch is dampening market activity. And if commercial property’s situation does grow worse, banks are likely to face further losses. One factor that might limit these risks is that the commercial real estate sector wasn’t as grossly overbuilt heading into the current economic slowdown as it had been in the early 1990s.