How would nationalization of banks affect commercial real estate?
If we look at the banking industry, we see thousands of retail stores occupied by bank branches and million of square feet of office space occupied by these institutions in New York City alone. In a nationalization scenario, the government could terminate leases at will. In addition to terminated leases, the conservators could use the threat of termination to renegotiate leases. For strong landlords, this tactic would be frustrating but probably acceptable as vacant office space is not something on anyone’s wish list today. For landlords with excessive leverage, the results could be devastating. Consider the potential impact this could have on the cash flows of the properties banks occupy. This dynamic will add even more pressure to rising capitalization rates which serve to reduce property values. Consolidation would be a likely scenario under any form of nationalization. Consolidation in the industry will continue to happen even if nationalization is not implemented, but it is much m
