Why Banks Should Take Notice of Retailers' Problems

Community bank risk managers should start to worry about the negative effects of retailers’ commercial real estate.

Community banks are the biggest investors in retailers, as they lend millions of dollars to retailers for their commercial buildings. As the culture of online shopping has rapidly increased over the recent years, the need for commercial buildings for retailers has declined. During the first quarter of 2017 alone, 3,000 retail stores have closed, which includes big name retailers such as Dillard’s, J.C. Penney, Kohl’s and Macy’s. Community banks are impacted greatly as they invest and lend to retailers, shopping centers and employees of these sectors. As commercial stores continue to close, employees are losing their jobs and this will also effect community banks in relation to the mortgages they hold with those retail employees.

As the online retail industry continues to grow, this poses the question as to whether or not retailers will be forced to close additional brick and mortar locations, which will affect community bank loans in the near future. Community banks will be forced to seek different strategies in investing in commercial lending, as well as the individuals with mortgage loans as retail unemployment could potentially spike.

For more information, please read “Why Banks Should Take Notice of Retailers’ Problems” written by Mayra Rodriguez Valladares, American Banker.

For additional information or assistance please contact Quinton Preston, Staff, Assurance Services.

SOURCE
American Banker

DISCLAIMER
This commentary represents the unique views of Quinton Preston, and is not representative of Marcum LLP, its partners or its employees.