Asher Wenig shares expertise in WMRE story: Major office distress is all the talk. But so far, its not the reality

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NEW YORK, NEW YORK (December 7, 2022) - Wealth Management recently highlighted a topic that has frequented headlines for some time: upcoming office distress. But, while the drum beat of the office sector's pending demise has been steady in the media, the figures from the firms that track commercial loan delinquencies, such as Trepp, Fitch and Moody's, tell a different story.

The article notes that in October, the office CMBS delinquency reported by Fitch stood at 1.23 percent, up from 1.19 percent in September, but still behind delinquencies for hotel, retail and mixed-use properties. Trepp reported the office delinquency rate for the month at 1.75 percent, up from 1.58 percent in September. The firm’s researchers tied the increase to lease expirations in the sector. Meanwhile, Moody’s reported the conduit delinquency rate for office properties at 2.69 percent, up 13 basis points from September and 30 basis points from a year ago.

A marker of potential instability in the sector is lessening demand for office space and a marketplace increasingly favorable to tenants. Tenants are waiting until the end of their leases to consider renewal or negotiation, noted Asher D. Wenig, senior vice president at Northmarq. “Landlords are increasing tenant improvements (TIs) allowances, and with a flux in office rents, it’s become a bit difficult to know the backfill options in many markets,” he added.

The office sector will likely undergo a lot of changes in coming years, with different tenant footprints and worker demands, Wenig says. While people are returning to the office, large gateway markets including New York, San Francisco and Chicago are seeing rent corrections and companies downsizing their office space.

Other topics include:

• Liquidity for financing distressed transactions
• Interest rates now vs during the Great Financial Crisis
• Investors eager for opportunities

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