Warning light flashes for the commercial property boom

commercial real estate

Bonds backed by commercial real-estate loans have weakened significantly since start of the year

By Serena Ng | The Wall Street Journal

commercial real estateThe financial engine of the market for office buildings, hotels and malls is showing signs of strain, raising questions about the resilience of the commercial real-estate boom.

Bonds backed by commercial-real-estate loans have weakened significantly since the start of the year amid concerns of an economic slowdown. Risk premiums on some slices of commercial-mortgage-backed securities have jumped 2.75 percentage points since Jan. 1, a move that translates into a roughly 18% drop in prices for triple-B-rated bonds, according to data from Deutsche Bank AG.

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