Risks in commercial real estate (CRE), particularly for the office sector, have been exacerbated by rising interest rates, people choosing to work from home, and banking stress, according to a analysis yesterday by Moody's Investor Service, Reuters reported. Office remains "particularly exposed" as a large share of employees continue to work from home, creating default risk for office real estate loans, which represent $736 billion, or 16.7% of CRE debt outstanding, the Moody's report added. Some strained commercial properties underlying commercial mortgage-backed securities (CMBS) — which represent 16% of CRE debt outstanding — are also likely to have trouble with refinancing. Moody's analysts expect an economic slowdown to dent revenue growth that had been driven by a post-pandemic demand recovery across multi-family, hospitality, retail and industrial sectors. Analysts expect CRE values in all sectors to soften as economic activity decelerates.
