Magazine article Mortgage Banking

S&P Expects CMBS Office Delinquency Rise. (Commercial)

Magazine article Mortgage Banking

S&P Expects CMBS Office Delinquency Rise. (Commercial)

Article excerpt

STANDARD & POOR's (S&P), NEW YORK, expects U.S. CMBS office loan delinquencies to rise in the near term, while U.S. office real estate investment trusts (REITs) will continue to face operating pressures. This is essentially the result of a breathtaking contraction in tenant demand, which began in earnest two years ago, according to S&P.

While supply has been relatively restrained this cycle, successive blows to the U.S. corporate sector (the tech bubble, corporate scandals and major contractions within sectors such as financial services and the airlines) have materially reduced demand for office space, according to S&P. This has put significant downward pressure on rents in most major markets. At the same time, landlord operating expenses are static to climbing due to rises in insurance and security costs, property taxes, rental concession and tenant allowances. As a result of this imbalance between supply and demand, office property revenue is expected to decline in the U. …

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