Over the next couple of years, we estimate that the UK’s commercial property correction could plausibly leave banks and holders of commercial mortgage backed securities (CMBS) facing cumulative losses of between £5 and £7bn. Losses on that scale would further constrain lenders’ ability and willingness to lend, but would represent just 2-3% of the Tier 1 capital of the nine largest UK banks, suggesting that they would not be a major threat to the banks’ solvency.
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