Empty Offices Are Driving Loan Delinquencies

High Vacancy

Hybrid work has become a staple of the post-pandemic American workplace. Around 1 in 4 white-collar office employees are no longer, well, office employees. While this has been a welcome shift for many workers, it’s less great for the $20 trillion private commercial real estate industry.

Fire Sale

Last month, delinquencies on commercial mortgages backed by U.S. office properties reached 5.8%, the highest rate since the end of 2017, according to S&P Global.

Historically, commercial real estate industry problems have been a factor in several significant economic downturns, including the savings and loan crisis of the 1980s and 1990s. But things aren’t quite as dire for now. The current rate of defaulting on commercial loans is a concerning sign, but it’s not even in the ballpark of the level seen during and after the 2008 financial crisis. Even so, industry analysts are keeping a keen eye on how this trend is developing, and what it could mean for the wider economy.

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