Hundreds of banks are at risk.
But hopes for an office real estate turnaround are looking less realistic.
Return-to-office trends have stalled out. And while the Fed has signaled that it does not expect to raise interest rates above their current 5.25 to 5.5 percent level, officials have been clear that they are in no hurry to cut them.
Mr. Hendry expects that delinquencies could nearly double from their current rate to touch between 10 and 12 percent by the end of this year. And as the reckoning grinds on, hundreds of small and medium banks could be at risk.
The value of bank assets have taken a beating amid higher Fed rates, Mr. Piskorski and Ms. Jiang found in their paper, which means that mounting commercial real estate losses could leave many institutions in bad shape.
If that were to rattle uninsured depositors and prompt the sort of bank runs that toppled banks last March, many could plunge into outright failure.
“It’s a confidence game, and commercial real estate could be the trigger,” Mr. Piskorski said.
Their paper estimates that dozens to more than 300 banks could face such disaster. That might not be a crushing blow in a nation with 4,800 banks — especially because small and medium lenders are not as connected to the rest of the financial system as their larger counterparts. But a rapid collapse would risk a broader panic.