High vacancy rates and low property values in the commercial real estate sector continues to hamper overall growth in the economy, one top banking official testified today.
Patrick Parkinson, director of banking supervision and regulation at the Federal Reserve Board, told members of the Congressional Oversight Panel construction of nonresidential structures continues to lag because of weak fundamentals in the sector, including high vacancy rates and low property values, which are unlikely to change in the near term.
"Credit losses for bank CRE loans typically continue well past the trough of recessions, and we expect this pattern to continue in this cycle," Parkinson said. "Working through the large volume of troubled CRE loans will take time as banks go through the difficult process of loan workouts and loan restructurings."
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