The office sector’s credit crunch is intensifying. By one measure, it’s now worse than during the 2008-09 global financial crisis. From a report:

Only one out of every three securitized office mortgages that expired during the first nine months of 2023 was paid off by the end of September, according to Moody’s Analytics. That is the smallest share for the first nine months of any year since at least 2008 and well below the nadir reached in 2009, when 47% of these loans got paid off. That share is also well below the rate before the pandemic, when more than eight out of every 10 maturing securitized office mortgages were paid back in some years.

While the numbers cover only office mortgages packaged into bonds — so-called commercial mortgage-backed securities — they reflect a broader freeze in the lending market for office buildings. Many office owners can’t pay back their old loans because they can’t get new mortgages. Remote work and rising vacancies have hit building profits, making it harder to pay interest. Higher interest rates have pushed debt costs up and building values down. That combination is fueling a rise in defaults. The share of office CMBS loans that are delinquent has tripled over the past year to 5.75%, according to Trepp. It doesn’t help that many banks no longer issue new office loans and that many insurance companies and debt funds have become more cautious.