creditors eager to avoid steep losses on halfempty office buildings in the wake of the pandemic have been sending chills through the rest of the roughly 55 trillion commercial realestate debt market a year ago property prices in this roughly 32 trillion slice of the us commercial property market were climbing even as executives struggled to coax more staff back to offices a year later old and outdated office towers remain a key source of dread but lenders now also must navigate stress in the banking system tighter credit conditions and a federal reserve that appears committed to keeping interest rates restrictive despite cracks in the banking system emerging a year into its interest ratehiking campaign “it couldn’t be more tone deaf” said jason callan head of columbia threadneedle’s structured assets team of the fed’s decision to raise rates in march after the collapse of silicon valley bank and signature bank “those issues are present at other banks as well” callan said “it’s clearly a concern” callan a longtime investor in the roughly 700 billion commercial mortgagebacked securities cmbs market said volatility was running high before concerns about “oldschool assetliability management problems” surfaced at us banks “cmbs seems to be at the epicenter of it” he said pointing to a blowout in credit spreads on bonds tied to skyscrapers hotels shopping centers and other property types “it’s up and down the capital structure it’s everywhere” see ‘some losses’ in commercial real estate and treasurys may still need to work ‘through the banking sector’ says fed’s kashkari the cmbs market isn’t the biggest lender to us commercial properties but it matters as a key funding source for landlords and as the closest thing to a realtime snapshot of credit conditions in the property landscape the mantra of the cmbs sector for decades has been that it helps diversify risks for realestate debt investors regionally and by property type in theory when a sector like aging shopping malls falls on hard times a boom in office space to highflying technology companies could help mitigate the damage the problem is tech and office buildings are now concerns too with pinterest inc pins on monday being the latest to shed san francisco office space cmbs credit spreads in march reflect high anxiety from investors about commercial real estate and default risks top aaarated bonds from older “conduit” deals that have exposure to different properties nationally gapped out by almost 45 basis points in march according to bofa global pushing spreads to about 155 basis points above the riskfree treasury rate higher risk bonds with bbb ratings were pegged at 950 basis points above the tmubmusd10y riskfree benchmark or a yield of about 13 “we might have seen it briefly gap out like this during the depths of covid” said david petrosinelli senior trader at insperex “but you really have to go back to 2008” a deal with regulators on monday to sell the deposits and loans of silicon valley bridge bank out of receivership to first citizens bankshares inc fcnca helped bolster market tone and to briefly firm up stocks the sp 500 index spx was lower tuesday even so a tough backdrop still lies ahead for landlords particularly if credit tightens further as roughly 900 billion of commercial property loans mature through 2024 see chart it took years for commercial property lending to revive after the global financial crisis what followed next was a decade of low rates that may soon backfire not only for landlords with debt coming due but for lenders who let borrowers take out billions in cash in the process san francisco has been touting tax breaks and revival plans for its reeling financial district while new york city wants rules eased to convert commercial buildings to housing still rows of eerily vacant 1960era office buildings filling bigcity skylines have become almost a nogo zone for many lenders while a smaller share of newer trophy buildings have attracted tenants some wall street strategists think property prices could fall 30 while an estimate from fitch ratings in 2021 warned that office values could plunge by 54 if companies and workers were to adopt a workfromhome strategy of three days a week “look there is going to be a lot of pain but i think people slowly are going to be coming back to the office” said daniel lisser vice president capital markets marcus  millichap capital corp an arranger of debt and equity financing for commercial real estate “but right now it is difficult out there”