The office real estate story is no longer primarily about empty buildings.
The market is entering a new phase where the pain is shifting to lenders, bondholders, and local governments. Office CMBS delinquencies have risen above levels reached after the Global Financial Crisis, while billions of dollars in loans are approaching maturity with little prospect of refinancing at favorable terms.
The reason: years of “extend and pretend” are ending. Lenders kept rolling over troubled office loans, betting lower rates and returning workers would eventually bail them out. Neither happened fast enough, and billions in loans are now maturing into a market that hasn’t healed.
The office reckoning that’s been delayed for years is finally hitting lenders’ books, and a delinquency rate above 2008 levels means this round of losses could be sharper than the last one for CMBS holders.
