Where is Distress Risk in Today’s CRE Market
Where Is The Risk In Today’s CRE Market?
Some Investors Face Greater Headwinds Than Others
Some CRE segments could see heightened distress this year, but risks are not broad-based
Aggressive investors strategies, underwriting and debt profiles will face challenges; urban office properties also face outsized risk
Some Financing Strategies Have Compounded Risk
Investors that maximized floating rate leverage, going as high as 80% face substantial risk
Investors with floating rate debt who did not get a rate cap or hedge may need to sell or recapitalize assets
Systemic Behavioral and Societal Changes Pressure Office
The hybrid work schedule could drive a significant office vacancy increase that snowballs into a broader problem for the market
Office properties make up roughly 26% of the loans maturing this year, and distress in these assets could create ripples that impact other urban property types
*Sources: Marcus & Millichap Research Services, Mortgage Bankers Association
