U.S. banks reported the highest percentage of delinquent commercial real estate loans in 10 years for the fourth quarter, according to Federal Reserve data.
The delinquency percentage rose to 1.57% of all outstanding commercial real estate loans — the same level as the fourth quarter of 2014.
The Fed listed the volume of commercial real estate loans outstanding at the end of 2024 at a little more than $3 trillion. Based on that fourth-quarter delinquency percentage of 1.57%, the volume of delinquent loans would equate to more than $47.15 billion.
The dollar amount of delinquent commercial real estate loans in the fourth quarter of 2014 would have been $25.08 billion, according to Fed data.
While delinquent loans have climbed since the third quarter of 2022, banks have been reluctant to take losses, Fed data shows. Banks charged off 0.26% of their commercial real estate loans in the fourth quarter. That percentage has been consistently around that level over the past five quarters.
A charge-off is a debt that a bank has written off as a loss and considers unlikely to be collected. Banks charged off about $7.8 billion in commercial real estate loans in the fourth quarter.
The delinquency percentage has the potential for further increases. Banks and supervisors should stay vigilant to known risks in the commercial real estate market, particularly within the office segment, as borrowers may find it difficult to refinance maturing loans, Michael S. Barr, vice chair for supervision for the Fed, warned last month.