Where Is The Risk In Today’s CRE Market?
Some Investors Face Greater Headwinds Than Others
- Some CRE segments could see heightened distress this year, but risks are not broad-based
- Aggressive investors strategies, underwriting and debt profiles will face challenges; urban office properties also face outsized risk
Some Financing Strategies Have Compounded Risk
- Investors that maximized floating rate leverage, going as high as 80% face substantial risk
- Investors with floating rate debt who did not get a rate cap or hedge may need to sell or recapitalize assets
Systemic Behavioral and Societal Changes Pressure Office
- The hybrid work schedule could drive a significant office vacancy increase that snowballs into a broader problem for the market
- Office properties make up roughly 26% of the loans maturing this year, and distress in these assets could create ripples that impact other urban property types
*Sources: Marcus & Millichap Research Services, Mortgage Bankers Association
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