Commercial Real Estate Faces Increasing Risk Amid Banking Turmoil

Hedge funds are increasing their bearish bets against office landlords, using credit derivatives and equities to bet against the companies and their debt, as concerns rise that the US regional banking crisis will slash the availability of credit to property owners that were already suffering from the pandemic and rising interest rates. Almost 40% of shares in the iShares US Real Estate ETF are sold short, the highest proportion since June, according to data from analytics firm S3 Partners. Regional banks account for about 80% of bank lending to commercial properties, according to economists at Goldman Sachs Group Inc.