A Closer Look at Office Commercial Real Estate & Investment Opportunities within Securitized Products

Overview of U.S Office Commercial Real Estate

Office properties in the U.S. Commercial Real Estate (“CRE”) Market have been garnering much of the attention from the markets and media, especially after the fallout from the regional banking crisis that was largely stemmed earlier in 2023. We wanted to delve deeper into the subject to discuss our thoughts and the potential opportunities within the sector. To begin, we want to discuss the size of the sector and related sub sectors. Below is an overview of how the property types of the U.S. CRE market breaks down across the approximate $10.9 trillion market value. As shown below, Offices represent approximately one quarter of the market as of the end of 2022.

U.S CRE Market Values by Property Type

From a lending perspective, CRE mortgage debt as of the end of 2022 was approximately $4.5 trillion1. The chart below demonstrates that property types are generally funded by a different mix of funding sources. Apartments and Senior Housing property types, for example, are 38% and 23%, respectively, funded by government sponsored entities, such as Freddie Mac and/or Fannie Mae which benefits them greatly since they get the most competitive loan terms from these entities. Offices, however, don’t have the benefit of such government sponsored mortgage loans and instead are the second highest CRE property type largely dependent on funding from banks which were the lender of record on approximately 59% of Office CRE in 2022.

CRE Lending By Property Type (2022)