Investment sales, office market expected to slow in wake of higher interest rates, inflation in 2023 - Dallas Business Journal

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The office market continues to be closely watched as companies consolidate their real estate and exit entire blocks of space, leading to a surge of sublease inventory and rising vacancy across the country.

"I think what’ll be very telling to watch there is if that trend continues, if space will continue to be put on the market," said Colliers International Group Inc.'s most recent investor survey found 55% expect losses for the office sector in 2023, the most negative outlook among property types surveyed.

So far, distress within office has remained low, although it's starting to grow. Trepp's commercial mortgage-backed securities special-servicing rate was 3.85% in November, up slightly from 3.72% in October and 3.43% in September. Loans enter special servicing when financial issues arise that are expected to affect a borrower's ability to stay current on payments.

"If 20% of your building is potentially going to roll, I think you’re going to have a hard time finding favorable financing," Hendry said. Still, those sectors require specialized knowledge, which means not all investors and developers will be able to transition into those property types, she added.

 

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