Canadian bank earnings at risk from office real estate exposure, says Bay Street analyst

© Provided by Financial Post Bank and office towers in Toronto's financial district. In a note to clients late Sunday, National Bank Financial analyst Gabriel Dechaine said commercial real estate loans represent the second-largest lending exposure of Canada’s six largest banks, trailing only residential real estate in proportional size, at around 10 per cent of lending portfolios. “Office exposures are particularly worrisome and represent 12 per cent of the average Big-Six CRE (commercial real estate) book.”Rising interest rates have challenged commercial real estate owners and investors while, at the same time, remote work is leaving many office buildings under-utilized and hurting rent prospects. Dechaine noted that impaired commercial real estate loans aren’t yet rising substantially for Canadian banks, save for some exposure in the United States. Other market watchers have expressed less concern about the ability of Canadian banks to weather exposure to commercial real estate.