WASHINGTON: The payoff rate on maturing U.S. office loans packaged in commercial mortgage-backed securities (CMBS) spiked in January and February from last year, according to a new report by ratings agency Moody's Investors Service.
More than 55 per cent of maturing office loans was paid off in January, while 25 per cent was paid off in February, according to the report. The combined 48 per cent payoff rate for the two months marks a significant increase from the overall 2023 rate of 35 per cent.
The first two months of the year saw US$1.15 billion of office debt packaged in CMBS reach their maturity dates.
There are US$17.4 billion in office loans maturing in the next 12 months, according to the report. Moody's deemed roughly US$13 billion of the amount, or three-quarters, as very difficult to refinance.
Concerns swirled last year over the heavy office loan maturity wall in 2024, as persistent inflation and remote working have strained landlords' ability to make loan payments.
While the payoff rate increased from last year, the figures should be taken with a grain of salt, Moody's noted.
Only 30 such loans have matured since the year's start, while smaller loans amounting to less than US$10 million had a higher payoff rate than larger debt loads.
Most other property types' payoff rates have continued to fare better than office loans. All industrial real estate loans due by the end of February paid off, followed by 89 per cent of multifamily loans and 61.8 per cent of retail loans.
Hotel loans fared the worst, with only 19.5 per cent of loans due at February's end paying off.
