Cheap debt fueled a decadelong boom in U.S. office values, offsetting the impact of years of rent increases that didn’t keep pace with inflation. Now that the long period of easy credit is over, office-building owners are bracing to see how much less their properties are actually worth, the Wall Street Journal reported. The prices of some aging office towers in places such as New York and Chicago have already fallen by about a quarter as potential buyers struggle to land financing with interest rates rising fast, brokers and lenders say. Defaults are starting to move up from low levels. While rising rates and recession fears have also hit the value of stocks, bonds and other types of real estate, office owners are in a particularly bad spot. They are also grappling with the growing popularity of remote work, which has hurt demand for offices and pushed up vacancies. Office-leasing volume in the biggest U.S. cities in the third quarter was 40% lower than prepandemic levels, according to brokerage JLL.
