According to a report by Trepp, bank data for the first quarter of 2024 revealed an increase in the percentage of criticized loans for 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 was not consistent across all regions.
For example, New York saw a significant rise in its criticized office loan rate from 33.5% to 44.5%, reflecting its inventory of outdated and obsolete buildings. Similarly, San Francisco also experienced an uptick in their criticized rate from 33.5% to 47.%7E.
In contrast, Washington DC’s office loan market had reached nearly69% criticism rate in 2022 but has since declined slightly to still elevated levels at49%. While these major cities may be more obvious examples, other cities’ office markets are also facing distress as reported by Trepp.
Atlanta’s property market saw a sharp jump from14%to43.%2E driven partly by excessive new construction and shifting preferences towards suburban areas among occupiers.
Likewise,Miami has seen itscriticizedrate surgefrom9.%2Et0 %in Q1of2023due tonew construction causinga supply/demand imbalanceinthe market.
