Major Lenders Exploring Reducing Office Loan Portfolios

Barclays Capital, Morgan Chase, Deutsche Bank and possibly other major lenders are reportedly looking to sell office building loans in major cities like New York to reduce their exposure. Bisnow on November 11, 2022 said “Lenders are reportedly focused on unloading office loans in their portfolio because they have been hit hardest by the pandemic and the rise of remote work, leading to record-high vacancy rates in some markets and declining values for many lower-quality assets.”    There are also reports that they may be discounting these loans to entice buyers to take them. In recent days there have been major layoff announcements. Amazon just came out with 10,000 tech worker layoffs, Salesforce will be laying off hundreds, Meta 11,000 and every day seems to be another layoff announcement. These are further signs of erosion in the office market. “New York insiders have said they expect a wave of “value destruction’ in the city’s office market.”  I have been keeping my eyes open for what might happen in the San Francisco Bay Area which is extremely vulnerable to the office tech sector.