Despite headlines about office sector stress, the broader commercial real estate (CRE) market is stabilizing through disciplined collaboration between lenders and borrowers. Loan modifications and sophisticated restructurings are preferred over foreclosures. Regulators are watchful but not sounding alarms. For community banks with CRE concentrations, the emphasis is on proactive engagement.
What you should do: Engage early with borrowers facing maturities. Be prepared to underwrite based on updated fundamentals—rent rolls, cash flow, and guarantor strength. Document your strategies clearly to meet supervisory expectations for problem loan management and reserve adequacy.
Source: https://www.law360.com/articles/2420722/expect-a-new-normal-in-commercial-real-estate-this-year