US commercial real estate: Storm in a teacup or next shoe to drop?

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Can there ever have been a death more comprehensively foretold than that of US commercial real estate (CRE)? The sector’s prophets of doom had been hyperactive long before the most recent turmoil in regional banking.

And why not? After all, there have been many indicators flashing red. The stock prices of real estate investment trusts (Reits) are falling sharply, as are those of some regional and smaller banks, which carry the bulk of bank lending to CRE.

Vornado Realty Trust, a Reit that invests in office buildings in Manhattan, is down 33% year to date and has dropped nearly 50% in just the last three months. The KBW Regional Bank index is down 27% since the start of the year. It fell 18% in just the seven-day period ending March 13.

Now barely a day goes by without an addition to the doom-scroll. In March, George Gatch, chief executive of JPMorgan Asset Management, said that CRE was one of the key risks in global markets, following interest rate hikes.

“When

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