Downtown Stamford as seen from a platform at the Stamford Transportation Center. (Courtesy Photo / Public Domain / DBen)
Real estate markets in southwest Connecticut will be seeing considerable maturities in Class B office loans between 2023 and 2026, but still at lower rates than other metros around the country.
In a loan maturity report by commercial real estate data firm CommercialEdge, around 15.7 percent of loans on class B offices in a swath extending from Greenwich to New Haven, totaling 129 loans equivalent to 7.9 million square feet of space, will mature by 2023 to 2026. Vacancy rate in the two areas is at 18.47 percent.
CommercialEdge cited in the report that weak office fundamentals and the high-interest rate environment have made investors and lenders averse to office assets. Investors, tenants and lenders prefer quality class A spaces, which results in the vulnerability of class B properties to value slides as overall tenant demand for office space shrinks.
On the national level, loans on 19.4 percent of office properties, equivalent to 1.3 billion square feet of office space, will reach maturity between 2023 and 2026. On the total class B office loans, around 18 percent or 592.2 million square feet are maturing by the end of 2026.
“While the spike in office mortgage delinquencies will depend on a host of factors, class B assets are in greater danger of defaulting due to due to the ongoing flight-to-quality trend that favors class A spaces. As a result, class B properties are facing an uphill battle in attracting tenants and maintaining competitive rental rates,” the report stated.
The Bridgeport-New Haven area has a lower percentage of maturing class B office loan portfolios. The cities with the highest percentage of soon-to-mature class B loans are Atlanta, Georgia (29.8 percent); Pittsburg, Pennsylvania (25 percent) and tech-driven Denver and Seattle (26.1 percent).
In terms of volume of maturing class B office loans, Washington, D.C. topped the list with 348 loans equal to 31 million square feet of space, followed by Los Angeles (398 loans, 27.48 million square feet), and Manhattan (220 loans, 25.2 million square feet).
