Are Office Loans Headed Down the Same Road as Mall Loans?
Trepp is keeping an eye on the performance of the office sector due to a similarity with regional and superregional malls in one key respect: the way properties are financed. Of the $53.3 billion in mall loans Trepp tracks, $35.9 billion is comprised of full-term interest-only loans. Similarly, $130.7 billion of the $184.5 billion in office loans Trepp follows is full-term interest-only.
“The data would suggest, at least from a structural perspective, that office properties have been financed largely in the same way as regional and superregional malls,” according to Trepp. A new report assesses whether office properties and loans could see the same fate as retail.
“We’ve seen many of these mall properties go into REO or foreclosure status,” said Lonnie Hendry, Trepp’s head of advisory services. “While we aren’t predicting the same fate for all office loans financed this way, it does bear following whether some office assets will see the same fate.”
Trepp’s report includes an overview of the similarities between retail and office loan structures, office occupancy compared with retail foot traffic, upcoming maturities and revenue per square foot.
Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces.
Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and GlobeSt.com at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications.
Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).