The slumping market for commercial real estate — viewed by many as the next big shoe to drop on the economy — now threatens to drag down regional banks as they struggle to collect on loans made against shopping centers and office buildings.
Seriously overdue loans against commercial developments have shot up dramatically in recent months, as delinquencies snowball on construction loans and mortgages for office buildings, malls and apartments.
That’s bad for giants like Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. But it’s even worse for smaller banks, which stepped up lending to local developers and businesses as a way to stay afloat after the national institutions grabbed big-ticket consumer businesses such as home loans, credit cards and checking accounts.
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