The U.S. commercial real estate industry has come under substantial stress this year as interest rates have continued to rise and banks have pulled back on lending following the regional banking crisis in March.

Nowhere is the stress more visible than in the office sector

where these cyclical pressures have combined with a structural shift toward

remote work to cause a sharp decline in property values. This is inflicting

sizable pain on real estate investors and

it's also fueling bigger worries about the stability of small and regional banks.

I'm Allison Nathan and this is Goldman Sachs exchanges.

On this special episode, we're breaking down the risks

from the commercial real estate crisis

that were the topic of our most recent top of mine report

now available on GS.com. We asked Scott Reckler chairman and CEO of real estate

investment firm RXR and Stein Van Neur, Professor of Real Estate and Finance at Columbia Business School,

how the crisis might evolve, the implications for investors, and whether it could spark another

round of the regional banking crisis.

Wreckler first describes the challenges facing the commercial real estate market.

He's pessimistic about the outlook for office properties in particular,

but he also says that it's wrong to paint all office buildings with the same

brush because some will be competitive and others won't be. Talk to us about what's

driving stress in the commercial real estate sector right now.

So the commercial real estate sector's stress is, I think, impacted by two things.

One is the regime change in terms of going from a near zero interest rate environment for the last decade plus to a more normalized interest rate environment.

Anything that was financed or purchased during that low-interest rate regime needs to be re-valued and

...