Trepp | The 13 Colonies Have a New Battle on Their Hands: Office Distress

About 250 years after the original 13 colonies declared their independence from England, their commercial real estate markets are facing a very different battle: CMBS office delinquencies.

Office distress is not evenly distributed across our nation’s first 13 states. Only four states with CMBS office exposure posted delinquency rates below the national average of 16.75%.

Connecticut recorded the highest CMBS office delinquency rate among the states at 52.63%, with 13 properties carrying delinquent loans that have a balance of $730 million. The rate should be viewed in context, as the state’s relatively small CMBS universe means a limited number of troubled assets can have an outsized impact on its overall delinquency rate.

New York, meanwhile, tells a different story. Its CMBS office delinquency rate is not among the highest in the original 13 states, but it is home to the largest concentration of distressed CMBS office debt. It has a delinquency rate of 6.44%, with 49 properties carrying $4.2 billion of delinquent debt.

Pennsylvania combines both a high delinquency rate and a significant amount of distressed debt, with 85 properties carrying $1.9 billion of delinquent loans and a delinquency rate of 33.59%.

New York and Pennsylvania are two of the nation’s oldest economic centers, developing into major hubs for finance, government, trade, and business over centuries. That growth created some of the country’s largest and most established office markets, but it also left behind large inventories of older buildings now navigating shifting demand, higher borrowing costs, and a changing workplace environment.

On the other side of the spectrum, New Hampshire has no delinquent office loans to report. Historically, its economy grew around industries such as fishing, timber, and manufacturing, rather than the ports, financial institutions, and government centers that helped create dense office markets elsewhere.

Ultimately, office distress is tied not only to current market conditions, but also to the economic forces that shaped each state’s real estate landscape over time. The colonies may have united in 1776, but nearly 250 years later, their office markets face vastly different challenges.

Compliments of Trepp LLC– a Premium Member of the EACCNY