Priya Patel
Office building owners are facing a significant load of debt repayments in 2024 that could put the U.S. economy at risk. Data from the Mortgage Bankers Association shows that there are currently around $117 billion in commercial mortgages tied to office buildings that either need to be repaid or refinanced this year, according to the Financial Times. However, a big portion of that number is at risk of defaulting.
A big reason these office buildings are having such financial trouble is that owners took out their loans when interest rates were half of what they are now. Another factor at play is commercial mortgages are almost always interest-only, which means low monthly payments but the original price is left to be paid at the end or refinanced to start the process over. The pandemic also played a role by causing widespread office vacancies. Since people were working from home during quarantine, many businesses downsized their office spaces, which decreased revenue.
There are 605 office buildings with mortgages expiring soon and Moody’s Analytics estimates that owners of 224 of them will have trouble refinancing. Manhattan has the most commercial mortgage loans expiring this year, followed by Houston, Los Angeles, San Francisco, Sunnyvale and Chicago. Chicago, New York City and San Francisco all have office vacancy rates of more than 20%.
