The U.S. Office Debt Opportunity
The U.S. property sector has faced headwinds from elevated interest rates, rising debt costs, and plummeting investor flows. This has resulted in falling values, lower transaction volumes, and pressures on banks' balance sheets – impacting owners on the equity and debt sides of the capital stack.
The result has been a reset in pricing but with significant dispersion amongst sectors, something we didn’t experience in the more synchronized downturn during the Great Financial Crisis. At the same time, a substantial number of loan maturities are coming due. Specifically, it’s estimated that almost $2 trillion in Commercial Real Estate loans will mature through 2027. Of that, just under 21% (about $400 billion) are tied to the office sector (see chart below).
Given this scenario, some owners will likely decide to sell, while others will need to refinance, whether working with current lenders (if they are willing) or finding new ones.
