Office loan delinquencies reach 9.4%, exceeding 2008 GFC peak. Fitch forecasts 11% for 2025.

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Office loan delinquencies have surged to alarming levels, matching those seen during the Global Financial Crisis (GFC). Fitch Ratings has raised its projections for office loan delinquencies, predicting an 8.4% rate for 2024 and 11% for 2025, which exceeds the GFC peak of 8.1%.

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As of October 2024, the delinquency rate for office Commercial Mortgage-Backed Securities (CMBS) has skyrocketed to 9.4%, a sharp increase from just 4.3% in April. This is the highest rate recorded since the most severe phases of the GFC.

The increase in delinquencies is primarily driven by several factors, including rising interest rates and slower economic growth. Additionally, there’s a marked decline in office space demand, making it increasingly difficult for property owners to refinance their loans. The office sector is grappling with multi-year challenges that are exacerbating the current financial strain.

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Sources:

  • CRE Daily – “Office Loan Delinquencies to Pass GFC Levels”
  • Wolf Street – “Office CMBS Delinquency Rate Spikes to 9.4%, Highest Since Worst Months after the Financial Crisis”
  • Business Insider – “The looming office-real-estate crash will be worse than the 2008 Era”