This post was co-written with JJ Medina, Managing Director ~ Enterprise Software Solutions for Financial Services at Pitney Bowes. It was first published on the Arcadia Data website.
Commercial Real Estate (CRE) is at a risky inflection point. The rate of charge-offs (when the value of loans are removed from books and charged against a loss reserve) are essentially at zero while delinquency rates are also at a historic low (see charts below). Low charge off and low delinquency rates along with increased competition for new loan business are tempting banks to relax CRE lending standards and give out risky loans. This is a major cause for headache among regulators as the CRE market continues to overheat and property values surpass pre-bubble levels.