Severe Crash Is Coming for US Office Properties, Investors Say

Office prices in the US are due for a crash, and the commercial real estate market faces at least another nine months of declines, according to Bloomberg’s latest Markets Live Pulse survey.

About two-thirds of the 919 respondents surveyed by Bloomberg believe that the US office market will only rebound after a severe collapse. An even greater majority says that US commercial real estate prices won’t hit bottom until the second half of 2024 or later.

Will the US Office Market Rebound Without a Severe Crash

That’s bad news for the $1.5 trillion of commercial real estate debt that according to Morgan Stanley is due before the end of 2025. Refinancing it won’t be easy, particularly the roughly 25% of commercial property that is office buildings. A Green Street index of commercial property prices has already fallen 16% from its peak in March 2022.

Commercial property values are getting hit hard by the Federal Reserve’s aggressive tightening campaign, which lifts a key cost of owning property — the expense of financing. But lenders looking to offload their exposure now are finding few palatable options, because there aren’t many buyers convinced the market is close to a bottom.

US Commericial Real Estate Prices Expected to Keep Sliding