Washington, D.C. — Ever since the commercial real estate market turned south in early 2007, investors have speculated about when this cycle’s distressed real estate opportunities would materialize. That conversation has not been limited to the United States. It turns out that investors in Europe and Asia have largely seen the same process play out there as has happened here; distressed real estate exists, but banks are working at a glacial pace in resolving problems.

A panel at the ULI Fall Meeting took up this discussion. The session, “Global Deals on Distressed Assets,” was moderated by Stephen Blank, senior resident fellow, finance, with ULI, and featured Robert Peto, president, the Royal Institution of Chartered Surveyors, and Simon Treacy, group CEO of Australian private equity real estate investment advisory firm MGPA.

New York City-based research firm Real Capital Analytics pins the current amount of total distressed commercial real estate in the U.S. at about $290 billion. Peto, for his part, estimated the level of distress at a similar level in Europe, where there is about 1.4 trillion euros in commercial real estate debt outstanding and about 150 billion euros in distress. According to Treacy, the picture in Asia is a bit murkier given the lack of transparency in China’s real estate market, while in Japan there is about $170 billion in commercial real estate debt coming due in the next few years.

To date, however, banks have largely sat on that debt. Phenomena like “extend and pretend,” where banks have opted to roll over troubled loans rather than recognize losses, have led to less opportunity than many investors imagined. In the U.S., about $90 billion in distressed debt has been dealt with. In Europe, Peto estimates that the total amount of outstanding commercial real estate has shrunk by as little as 20 billion euros since the market’s peak. “Almost nothing has been taken out,” he said. “There’s been no meaningful pay down.”

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