Looming Lease Expirations Are Extra-Scary For Loan Market

Lease expirations are one of the biggest threats to the loan market, according to a new analysis from Trepp. And that’s especially true for the office sector: nine major leases are set to expire in the coming months.

“The debate (is) fierce between those that believed office attendance would revert to pre-COVID levels over time and those that believed a hybrid model or permanent work-from-home would be the new normal,” Trepp’s Jack LaForge notes. “That debate is still unsettled, but many firms are opting to sublease space in the short term in order to avert costs in the remaining months of their lease. However, when those leases expire, firms will have a decision to make, and we have already seen dribbles of what looming lease expirations can do to the performance of loans.”