Owners of US offices confront $170 billion debt repayment barrier.

January 2, 2024
1 min read

According to data from the Mortgage Bankers Association, US office owners are facing $170 billion in debt repayments in 2024. Many of these loans were taken out a decade ago when interest rates were much lower, and now office owners are struggling to refinance at current rates. This raises concerns of potential losses for investors. While the expected losses are not as severe as during the 2008 housing crisis, they could still have significant impacts on property developers and lead to forced sales in the office market. Regional banks are especially vulnerable to these potential losses, as around 40% of office loans on their balance sheets are underwater. Commercial mortgage-backed securities (CMBS), which are held by insurance companies, pension funds, and individual investors, are also at risk. Delinquencies on office loans financed by CMBS have risen to 6%, up from 1.7% a year earlier. Moody’s Analytics estimates that owners of 224 out of 605 buildings with soon-to-expire mortgages will have trouble refinancing this year due to excessive debt or poor rental performance.

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