It seems almost counterintuitive to think of distance as a possible financial risk factor in a global economy marked by its interconnectedness, yet economic theories suggest that what’s called the “friction of distance” can cause trouble. If that’s the case – and if it applies to lenders financing commercial real estate loans outside their geographical areas of expertise – it’s useful to examine regional commercial real estate lenders that are exposed to the distance factor, as we do below.
Of course, as with any risk, there’s always the upside to think about too. If a bank is successfully able to manage whatever element of risk may be involved in expanding its lending to more distant markets, that can be a good way to enlarge and diversify its loan portfolio as well as drive overall institutional growth.
