"2024 Commercial Real Estate Crisis: Soaring Defaults and Economic Risks"

A National Bureau of Economic Research paper and USC Finance Professor Erica Jiang warn of potential Great Depression-era levels of loan defaults in the commercial real estate sector if high interest rates persist. With 15% of commercial loans currently underwater and 45% of office loans facing distress due to declining property values and cash flows, the outlook for defaults is grim. The difficulty in refinancing these loans, especially with a significant number of them maturing in the near future, could lead to a spike in maturity defaults, posing a significant risk to the financial stability of the commercial real estate market.