Commentary
Commercial real estate faces increasing headwinds. Delinquency rates, especially for office buildings, have spiked and show signs of climbing still higher. Both developers and lenders are set to lose. The pain is passing through to those who hold bonds backed by commercial mortgages, the so-called commercial mortgage bond securities (CMBS). There is little sign of relief anytime soon.
The problem lies largely, though not entirely, with the work-from-home legacy of the COVID lockdowns and quarantines. Because office workers especially became accustomed to remote work, they remain reluctant to make their former daily trek to city-center offices. That reluctance has found a powerful reinforcement in rising crime and a marked deterioration in the quality of city life. Firms have begun to adjust so that much space in the great glass boxes downtown lies empty and not earning the rents for which they were built. Developers unavoidably feel the pinch….