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THE NEXT WAVE
While an anemic recovery is underway for the retail and hospitality sectors, a new wave of CMBS delinquencies is rolling in and about to crash. Indicators for the decline of the Office sector:

  • According to a recent Trepp Client Survey, 44% of respondents report occupancy will be “Well Below” historic levels found prior to the pandemic.1
  • Business Insider quotes a PwC survey of 1,000+ full-time and part-time employees who stated 41% of workers are currently working at home and want to stay that way.2
  • In a recent GlobeSt.com article, Robert Platt at Gantry is quoted, “It’s not only a question of when tenants are going back to the office, but will they ever go back.”3

This just scratches the surface of numerous articles and surveys grappling with the new normal and the future of the workplace. The underlying question:

When will workers return to the office? Will they return at all?

It is a haunting question for those in commercial office lending and even more so for those in the CMBS space. CMBS loans are structured with a low tolerance...for much of anything. Unlike other commercial loans, CMBS financing dictates a set of stringent rules, with little to no flexibility.
Office Sector CMBS Loans will struggle for the next 18+ months
Demand for commercial space has declined precipitously compared to pre-Covid. Landlords/Borrowers in large urban cores are seeing tenants vacating their properties in droves, especially in more expensive cities like New York and Chicago.

Tenants are not renewing, exercising early termination clauses or just exiting overnight. Borrowers are left with gaping vacancies that cannot be filled along with loan payments they cannot make. Property values are plummeting against a backdrop of $36 Billion in CMBS Office Loans that are set to mature between now and 2024.4
Don’t Wait. Start Now.
The Henley Group can anticipate the myriad of challenges Borrowers face and then plan, innovate, and negotiate for the best possible results. Early intervention always means a better outcome.

Do you have a troubled loan? Reach out to The Henley Group.

Borrowers are best served when we can partner early on, providing more insight, analysis, and solutions to manage the angst and uncertainty, and deliver optimal success. As always, our success is your success.

We are CMBS Borrower Advisors with over a decade of highly focused expertise and success in partnering with clients to catalyze loan resolutions. Dedicated to service excellence and outstanding outcomes, we have $10+ billion in CMBS workouts and loan assumptions with a 95% success rate in 2020 and 2021. Our unique skill set, patient negotiating style, and understanding of the Servicer's mindset allow us to get results that may be not be available to you.
Call David Arthur 617.719.1087
1. Trepp 2021 CRE Sentiment Survey Results. 20,000 Respondents. August 13-21, 2021
2. "41% of remote workers never want to go back to the office — up from 29% in January." PwC Survey, Business Insider. Madison Hoff. August 25, 2021
3. "Life Companies Wary of Office Deals: Multifamily, industrial and even retail deals are getting financed, but urban and suburban office is still considered a challenged asset class." GlobeSt.com. Kelsi Maree Borland. October 13, 2021
4. Trepp Office Tenant Report October 2021. Trepp CMBS Research