This article is the fourth installment in a series that delves into the truth behind negative headlines surrounding the commercial real estate industry. Previous articles have explored topics such as “CRE Experts Refute Doom-and-Gloom Office Headlines” and “Unraveling the Office ‘Doom Loop’.”
At first glance, recent numbers may seem concerning. According to a report from CommercialEdge, there is currently $920 billion of office debt nationwide, with nearly $150 billion set to mature by 2024 and over $300 billion by 2026.
However, experts in the field caution against painting all office properties with one broad brushstroke. While it’s true that many buildings are facing debt maturities and challenges in leasing and valuation, not all properties are struggling.
Adam Finkel of Tower Capital acknowledges that some owners may face serious issues when their loans come due if their properties do not meet loan-to-value or debt-coverage requirements. He also notes that larger office assets in major cities like Los Angeles and New York have already been returned to lenders or sold at discounted prices.
Similarly, Adam Showalter of Stream Realty Partners points out that around 90% of office buildings will see their loans mature within five years – but this does not necessarily mean they will be unable to refinance or find other solutions before then.
Aarica Mims from KDC adds another layer to this issue: rising interest rates making refinancing more difficult for those whose loans are coming due now compared to when they were initially secured at lower rates.
Eli Randel from CREXI echoes these sentiments about increased capital costs making refinancing challenging for some property owners but notes there could still be opportunities for creative solutions through working closely with lenders.
Scott Morse of Citadel Partners suggests that those who acquired properties several years ago under favorable conditions should fare better than others facing expiring loans on underperforming assets without strong amenities or tenant credit profiles.
Petra Durnin of Raise Commercial Real Estate points out that properties with strong fundamentals, such as low vacancy rates and diverse income streams from mixed-use developments, may also be better positioned to weather the storm.
Ultimately, it’s important to recognize that not all office properties are facing the same challenges when it comes to debt maturities. While some owners may struggle with cash flow and potentially hand their keys back to lenders, there are also opportunistic buyers waiting on the sidelines for a chance to acquire core assets at discounted prices. As Hayim Mizrachi from MDL Group notes, it’s crucial not to paint all office properties with one broad brush – each situation must be analyzed individually.
