Office landlords squeezed by falling occupancy rates, refinancing difficulties. Here's why
The failure of several large lenders earlier this year and the banking turmoil that followed have fueled worries for owners of office space
LOS ANGELES (AP) — The failure of several large lenders earlier this year and the banking turmoil that followed have fueled worries for owners of office space such as Boston Properties and Vornado Realty Trust.
The sharp run-up in interest rates by the Federal Reserve over the past year and a slowing economy had already set the stage for office building owners and other commercial real estate companies to have a harder time refinancing their debt. Then the bank failures, starting with the mid-March collapse of Silicon Valley Bank, rattled the banking industry, which has since tightened its lending standards.
Unlike apartments, industrial buildings and other commercial property sectors, office space has been plagued by rising vacancies since the pandemic popularized working from home.
Falling demand for office space could lead to declining property values, which also makes it harder for owners to refinance. That could drive up loan losses for banks and further limit lending in healthier areas of the commercial real estate market.
