Peeping in at the corners of the U.S. CRE financing problems — rates too high, banks wary to lend, refinancing tough to get — are the various rising costs of commercial real estate properties. Expenses that act like a pry bar, pulling profit out of a property’s NOI.

Rising insurance premiums and lower levels of coverage are more than an anecdote here and there. In January 2024, the Federal Reserve’s Beige Book noted a comment out of the Kansas City Fed: “Some contacts suggested that transaction activity may pick up slightly in coming months as appetites for restructuring loans may increase after year end. Yet, falling rents and rising insurance costs adversely affecting net operating incomes remained widely cited concerns inhibiting loan restructuring when desired.”


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Erik Sherman

 

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