It’s a case of bad news first, some consolation good news second, according to a Moody’s report
Office markets are heading to a worse place by the end of 2025 than in 2023 or 2024. Property and loan performance will remain at risk, projects Moody’s. Through next year office repayment rates will increase only “slightly” even while vacancies remain elevated, and rents will be weak.
Weak rents will owe to falling revenues as high vacancy rates and continuing hybrid work, causing existing tenants to reduce their office footprint. The combination of factors will give occupiers greater negotiation leverage. Leases will continue to reset lower, although steady long-term rates will help stabilize property valuations. Even so, Moody’s projects office delinquency rates to surpass 14% before 2026. That’s up from 11% in November 2024.
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