According to Trepp’s report, bank data for the first quarter of 2024 reveals an increase in the percentage of criticized loans against office buildings compared to the previous year. These are loans that are at a higher risk of default or already in default. However, this increase is not consistent across all regions.
For example, New York has seen a rise from 33.5% to 44.5% in its criticized office loan rate due to its inventory of older and outdated buildings. Similarly, San Francisco also experienced an uptick from 33.5% to 47.%7E7%. In contrast, Washington D.C.’s rate peaked at nearly69%, but has since decreased slightly to49.%1%.
While these major cities may be prominent examples, other cities’ office markets are also facing challenges.Trepp notes that Atlanta’s criticized loan rate for office properties surged from14%%0to43.%2%, partly due tonew construction and a shift towards suburban areas by businesses.
Miami’s market saw a similar trend with their criticized loan rate jumping from9.%2to30..4%. This can be attributed again tonew construction leading todemand exceeding supply.
