Commercial real estate concerns
Along with the surge of risk assets, Rosengren also expressed potential problems ahead in commercial real estate, based on evolving economic models. He specifically cited bank loans to companies involved in “co-working” or leasing working space then subletting to other companies. Such arrangements would get hurt quickly in a downturn and jeopardize those bank loans, he said.
“The incentive to take on more leverage and to reach for yield can be costly – but the costs are apparent only when a downturn occurs,” he said.
Rosengren did not mention any companies by name, but the model he cites is employed by WeWork, which has been involved in a troubled initial public offering that has yet to launch.