Tom D
Elite Member
- Joined
- May 22, 2015
- Professional Status
- Certified Residential Appraiser
- State
- Pennsylvania
Four and a half years after the pandemic sent workers home, the office property bill is finally coming due.
The market for office buildings — already reeling from higher vacancy rates amid the rise in remote-work policies — has been crushed by high borrowing costs, and while the Federal Reserve is at last preparing to cut interest rates, it may be too little, too late. Investors, banks and property owners are now beginning to accept that some commercial buildings will never recover their pre-pandemic value, and that's leading to a steady drumbeat of distressed sales.
The market’s troubles have caught the attention of Congress — with one New York lawmaker calling it a “ticking time bomb” for banks as nearly $1 trillion in commercial real estate loans are coming due this year. Faced with vacant office buildings and a shortage of millions of homes to meet demand, a bipartisan group of lawmakers is trying to make it easier for developers to convert underused properties into housing.
Over the last four months, seven office properties were sold at a staggering loss of more than $100 million each, up from just one such sale in the first three months of the year.
About 70 percent of bank-held commercial real estate mortgages sit on the balance sheets of regional and smaller lenders — a source of alarm for regulators, since smaller banks don’t have the capital reserves or other lines of business to fall back on that larger banks have.
The market for office buildings — already reeling from higher vacancy rates amid the rise in remote-work policies — has been crushed by high borrowing costs, and while the Federal Reserve is at last preparing to cut interest rates, it may be too little, too late. Investors, banks and property owners are now beginning to accept that some commercial buildings will never recover their pre-pandemic value, and that's leading to a steady drumbeat of distressed sales.
The market’s troubles have caught the attention of Congress — with one New York lawmaker calling it a “ticking time bomb” for banks as nearly $1 trillion in commercial real estate loans are coming due this year. Faced with vacant office buildings and a shortage of millions of homes to meet demand, a bipartisan group of lawmakers is trying to make it easier for developers to convert underused properties into housing.
Over the last four months, seven office properties were sold at a staggering loss of more than $100 million each, up from just one such sale in the first three months of the year.
About 70 percent of bank-held commercial real estate mortgages sit on the balance sheets of regional and smaller lenders — a source of alarm for regulators, since smaller banks don’t have the capital reserves or other lines of business to fall back on that larger banks have.
