Despite an overall healthy-looking economy, there are some warts here and there. One place that looks frail is the office real estate market. Since COVID pushed many office workers into the work-from-home model and upended what normal workplace attendance looks like, office owners have struggled to fill vacancies. Banks have mostly been willing to work with borrowers who financed office buildings, but their patience is running out as interest rates appear to have reached something like a bottom.
Peter Grant explains in The Wall Street Journal that “The end of this forbearance reflects how lenders have made two determinations. For one, they are betting that mortgage rates aren’t going back to the historic low levels seen during the pandemic.”
Grant notes “The delinquency rate for office loans in commercial mortgage-backed securities climbed to a record 12.34% in January, the highest level since Trepp began tracking in 2000.”
For the overall commercial loan market, delinquencies are also up. In the third quarter of 2025, commercial real estate loan delinquency rates were 1.56%, up from a recent all-time low of 0.63% in Q3 of 2022 (which includes all commercial real estate types, not just offices, as Grant’s data, sourced from Trepp, did).
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