Today's (July 20th) issue of the Wall Street Journal featured an article in the Money & Investing section about the suffering commercial real estate financing industry and its impact on the banking crisis.
As many people are aware, banks have been failing in large numbers over the last 18 months due to short-sighted lending policies and, in some instances, mismanagement and fiduciary scams at senior levels. Now commercial real estate, often a solid monetary investment, is coming under fire as properties and property portfolios are being devalued by increasing vacancies, falling rents and changes in how companies are pursuing their commercial space strategies.
As earnings season heats up in the last couple of weeks of July, investors are closely watching the financial statements from banks and lending institutions to see how they are writing off the commercial loan losses, and for insight into the financial institutions' plans for addressing these earnings issues in the coming months. (You can read Lingling Wei's story here.)
With the commercial real estate market valued at approximately $6.7 trillion USD, is the industry too big to fail? And how will the stock market react to these losses, or perception that losses are coming? The coming quarter should prove most interesting to watch.
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