The financial engine of the market for office buildings, hotels and malls is showing signs of strain, raising questions about the resilience of the commercial real-estate boom.
Bonds backed by commercial-real-estate loans have weakened significantly since the start of the year amid concerns of an economic slowdown. Risk premiums on some slices of commercial-mortgage-backed securities have jumped 2.75 percentage points since Jan. 1, a move that translates into a roughly 18% drop in prices for triple-B-rated bonds, according to data from Deutsche Bank AG.
The sharp move could make it harder for buyers to keep paying ever-higher prices in a market regulators already caution could be overheating. It is also causing a lot of head scratching on Wall Street. Real-estate prices are at or near record highs in many parts of the U.S., and loan delinquency rates are low.
The sector doesn’t have much exposure to oil and energy companies, the focus of a lot of the recent market distress.
Read Full Story: Warning Light Flashes for the Commercial Property Boom
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