Published by FOX Business | April 18, 2024
The commercial real estate market is starting to buckle under the weight of higher interest rates and remote work.
There were 625 commercial real estate foreclosures in March, up 6% from February and 117% from the same time last year, according to a new report published by real estate data provider ATTOM.
The figure is calculated based on commercial properties with at least one foreclosure filing — including default notices, scheduled auctions and bank repossessions — entered into the ATTOM Data Warehouse during the month.
California had the highest number of commercial foreclosures in March, with 187 properties. While that marked an 8% decrease from the previous month, it is a stunning 405% jump from the previous year.
“California began experiencing a notable rise in commercial foreclosures in November 2023, surpassing 100 cases and continuing to escalate thereafter,” the report said.
New York, Florida, Texas and New Jersey also saw notable increases in commercial foreclosures last month.
Foreclosures have steadily risen since May 2020, when they hit a record low of just 141 properties. At that time, the U.S. economy was still in the throes of the COVID-19 pandemic, and many lenders offered commercial loan forbearance to borrowers to help them stay afloat.
However, those agreements have largely expired and now, the commercial real estate market is struggling with a number of challenges, including higher interest rates and waning demand for office space as more companies allow employees to work from home.
About $1.5 trillion in commercial mortgage debt is due by the end of 2025, but steeper borrowing costs, coupled with tighter credit conditions and a decline in property values brought on by remote work, have increased the risk of default.
