KBRA Releases Research – Building Vintage Driving Office Distress; Municipal Response Varies

NEW YORK–(BUSINESS WIRE)–#KBRA–KBRA releases a report on the higher distress rates of older office buildings and how municipalities are dealing with the growing stock of obsolete office properties.

With the flight to quality, older properties are struggling to retain and attract tenants. The impact of this is now manifesting itself in commercial real estate loan performance. When analyzing the CMBS 2.0 office population based on year built, KBRA found that older office buildings are generally associated with higher rates of delinquent or specially serviced current loans (collectively, the distress rate). The CMBS 2.0 distress rate increases from no distress for the newest properties (built 2015 to present) and reaches 10.9% for those built before 1960.

The U.S. office stock is showing its age. A 2023 Cushman & Wakefield report, Obsolescence Equals Opportunity, found that up to 70% of the country’s office stock was built before 1990, and more than 20% (over 1 billion sf) of its office inventory is now considered competitively obsolete. Approximately 60% of CMBS office loans by count (64% by balance) are pre-1990 builds.

To combat some of the older vintage office properties with high vacancies that may have become obsolete, cities are taking steps to revive struggling downtown office business districts. MSA credit performance can be influenced by the actions or inactions taken by local municipalities. In the report, we looked at how the top five MSAs (Denver, Chicago, Philadelphia, Washington, D.C., and Houston) with the highest office distress rates are handling older vintage stock. In addition to these five, we looked at Manhattan—which has one of the largest office markets in CMBS.

Overall, it will take municipalities to come up with creative thinking and redevelopment plans, as well as financial assistance, to possibly help reduce what is expected to be an increase in older vintage CMBS 2.0 office distress rates.

Click here to view the report.

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KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.


Larry Kay, Senior Director, CMBS Ratings Surveillance

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Aryansh Agrawal, Analyst, CMBS Ratings Surveillance

+1 646-731-1381


Roy Chun, Senior Managing Director, CMBS Ratings Surveillance

+1 646-731-2376


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