Iin its report, Bank of Spain warns of the impact that the pandemic may have on the development of the commercial real estate market. The Spanish Covid-19 crisis has negatively impacted the valuation of tertiary real estate (which includes commercial assets, offices, hotels and logistics). Moreover, it warns that this could have a negative impact on banks capital “as a result of a possible increase in non-performing loans for these activities.”
The supervisor also notes that the coronavirus has caused a significant correction in activity, prices and new financial transactions (commercial mortgages) in the sector, which contrasts with the relatively better performance that the housing market has seen so far.
Commercial mortgages
At the end of the first quarter of 2021, the outstanding balance of mortgage loans secured by commercial real estate reached 84 billion euros, which is 15% of the total mortgage portfolio of lending institutions in Spain. At the end of the last year, these portfolios accounted for 40% of the Tier ratio, so any significant deterioration in the solvency of debtors in this segment could have a “negative impact on the solvency of the banking system,” the agency warns.
Increase in doubtful loans
On the other hand, the Bank of Spain warns that after the completion of support measures in the form of guarantees and moratoriums for enterprises in the framework of the crisis caused by the coronavirus, the volume of doubtful loans may increase. In the first quarter of 2021, “the amount provided under the moratoriums in this segment came to 9 million euros.”