To help you understand what is going on in regards to commercial real estate and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…
Delinquent commercial real estate (CRE) loans at U.S. banks are on the rise. The volume of past-due loans in which commercial proprietors missed more than one payment jumped 36% in the third quarter.
Borrowers have struggled lately to refinance their loans amid declining property values and rising interest rates. Bank lending remains in historically good shape despite the delinquencies. But past-due CRE loans will continue to increase as long as property values remain under pressure, particularly those in the beleaguered office market.
Banks are stepping up efforts to restructure CRE loans to avoid losses. For example, the volume of loans in which Bank of America has either forgiven interest or extended due dates rose by nearly $750 million in the third quarter. Many banks are also setting aside more money to cover expected losses from their CRE portfolios.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The Office Market
The office market is still under pressure as the vacancy rate remains high. The national office vacancy rate reached 19.2% in the third quarter, up from 18.9% in the second quarter. The office market also saw another quarter of relatively stagnant rent growth. Asking rents rose 0.08%, while effective rents climbed just 0.04%. Both have been flat for the past year, with demand for office space still unstable.
New office construction is on track to finish below the historical average. A key contributor to the problem is that many folks still work from home. Around 26% of households have one person who works from home at least one day of the week, according to recent Census data. But fewer folks are doing so full-time, suggesting that many companies are still shifting toward a hybrid work arrangement.
The good news is that most cities are now seeing workers return to the office. Apart from Boston, Houston, Miami, San Francisco and Washington, D.C., the share of folks working from home has fallen over the last year in all major metro areas.
However, office financing will dry up as demand for office-backed bonds drops. Delinquency rates for commercial mortgage-backed securities focused on office loans rose to 4.6% in October., the highest since 2018, causing many investors to steer clear.
This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.
Related Content
-
A New 2026 Tax Deduction Change for People Over Age 65Tax Changes Adjustments to the extra standard deduction can impact the tax bills of millions of older adults. Here are some new amounts to know for 2026.
-
Family Tax Credits 2026: New IRS Changes That Can Save You MoneyTax Credits While the child tax credit remains the same, other family tax credits are higher for 2026, including the earned income tax credit and other inflation-adjusted amounts. Here's what they're worth now.
-
Apple Readies for AI Upgrade with New iPhonesThe Kiplinger Letter The tech giant has stumbled when it comes to artificial intelligence, but a new batch of iPhones will help it make headway.
-
Japan Enters a New Era of Risk and ReformThe Kiplinger Letter Japan has entered a pivotal moment in its economic history, undertaking ambitious policy and structural reforms to escape from decades of stagnation.
-
How Consumers Are Tinkering with Cutting-Edge AIThe Kiplinger Letter Companies launching artificial intelligence tools are jostling for consumer attention. Some products are already building a deep connection with users.
-
After Years of Stagnant Growth, Hope Emerges for EU EconomyThe Kiplinger Letter Can a German fiscal push outweigh French political peril?
-
Small Businesses Are Racing to Use AIThe Kiplinger Letter Spurred on by competitive pressures, small businesses are racing to adopt AI. A recent snapshot shows the technology’s day-to-day uses.
-
How AI Puts Company Data at RiskThe Kiplinger Letter Cybersecurity professionals are racing to ward off AI threats while also using AI tools to shore up defenses.
-
AI Start-ups Are Rolling in CashThe Kiplinger Letter Investors are plowing record sums of money into artificial intelligence start-ups. Even as sales grow swiftly, losses are piling up for AI firms.
-
What is AI Worth to the Economy?The Letter Spending on AI is already boosting GDP, but will the massive outlays being poured into the technology deliver faster economic growth in the long run?
