Top 25 MSAs: Office Loans Maturing in 2023-2024
The OFFICE market is facing considerable pressure with over $36 billion in loans set to come due in the Top 25 MSAs across the U.S. in 2023-2024.
The sheer volume of maturing office loans in the current high-interest rate environment and tighter liquidity market will pose ongoing challenges for commercial property Owners.
The road ahead is not all gloom and doom. But advanced planning is the strongest tool in your arsenal. Please reach out to us. We are here to lend an ear and strategize with you about possible outcomes and pathways for success. Let’s talk.
WHAT’S HAPPENING
It will be difficult to refinance certain 2013 and 2018 (10-year/5-year) deals in 2023. Loan coupons have risen from roughly 250 bps to 350 bps since these loans were originally underwritten.
Even in the best-case scenarios where properties have retained their tenancy and economic value, DSCR will be lower at refinancing (due to higher interest rates) which means less cash-out potential for Borrowers, or leaving some to write a check at closing to right-size the loan.
Given today's "tenant market," Landlords are faced with making hefty capital reinvestments in their properties. Tenants are demanding significantly higher TI allowances and rent concessions than in previous cycles, and require highly appointed, customized, and downsized space. Class B and C owners in particular face some tough decisions.
EXPECT CMBS Lenders to "mark-to-market" office rents which will put downward pressure on underwritten cashflow and make certain assets impossible to refinance.
