There’s Both Debt and Equity Available for Office Deals. Stringent Underwriting Is the Key.

A decline in office utilization if it lasts beyond the pandemic could pose risks for loans backed by office assets, because it is likely to impact office rents, occupancy rates and market values, according to a recent report from Moody’s Investors Service. The report notes that the impact would be greatest in urban markets with the highest average rents. That, in turn, would heighten risk to office-backed CMBS loans—the largest segment of the CMBS market. It would be a particular problem for loans with aggressive underwriting that are maturing in four to seven years, according to Moody’s.