The US banking system has becoming increasingly exposed to retail and industrial property, which could make it vulnerable to a market downturn, Credifi has warned.

In a report published on Tuesday, the real estate data firm said the banking system “has much greater risk exposure than publicly recognised”, due to the level of real estate lending.

It said there were “particular pockets of risk” relating to retail and industrial assets that were vulnerable to “declines in global factory output”.

According to Credifi data, more than $100bn (€89.5bn) in new real estate loan originations in these sectors took place during the past three years.

Although the level of lending to commercial real estate declined from 2017 to 2018, “the banking system has particularly troubling exposure” to retail and industrial which it characterises as “at-risk sectors”.

“Prognosticators vary, but many concur on one thing – a downturn is coming,” the report said.

“This does not mean total global meltdown (like in 2008), but it does mean a decline in the economy and, by extension, in manufacturing and other productive assets.

“If and when such an event happens, industrial production and, separately, consumer spending may be affected.”

Retail and industrial real estate “will be hit by extension”, it said, “potentially harming” commercial mortgages and the stability of the banking system.

Credifi also said the declining use of securitisation meant banks’ risk exposures were less diversified.

Risk retention rules, brought in after the 2010 Dodd-Frank Act, require banks to retain at least 5% of the risk exposure in real estate loan securitisations. Credifi said this meant commercial mortgage-backed securities (CMBS) were “no longer the default response for risk diversification”, especially in retail and industrial.

“With the relative decline in CMBS lending, more of this risk is clustered on the balance sheets of traditional lenders,” it said.

“While loan participation and syndication markets help move this risk around among lending institutions, the risk remains a troubling part of the overall system.”

Data from Commercial Mortgage Alert shows that $250bn of retail and industrial loans were issued in 2018, but less than 10% – $16bn of retail and $8bn of industrial – were securitised into CMBS.

“The implication of all of this on the banking system is profound – as it means that the system holds more loans on-book and thus is more exposed to risks in the overall economy,” Credifi said.

“If the market now enters a period of cyclical risk relating to economic downturn, these banking risks are elevated.”