Nearly half of existing office assets sold or refinanced from 2015-2022 with low rates and elevated valuations

April 19, 2023
  • Jacob Rowden
  • As office asset valuations remain under pressure and a wave of debt maturities looms, nearly half of the office market has been traded or refinanced since 2015 – leaving these assets at higher risk of distress because the debt was originated in a low-rate environment with near peak valuations.
  • A wave of inbound cross-border capital targeting U.S. office in 2014-2015 drove outpaced price appreciation, and valuations have remained elevated with gradual growth through the remainder of the cycle leading up to the pandemic.
  • Despite the large share of the office market which falls into this more precarious segment, there are several mitigating factors associated with healthier office loans: growth markets in the Sun Belt have experienced outpaced price appreciation in the last five years, making those loans less susceptible to valuation impacts, loans with fixed-rate debt are less vulnerable to rate increases, and any loans with maturity dates in 2024 or later are likely to see some degree of interest rate relief prior to those maturities arising if forward curves are any indication of future rate cuts or hikes.