Lessors of Nonresidential Buildings NAICS 531120

Jul 16, 2025 - Office Supply to Shrink for First Time in 25 Years

• Amid increased conversions and demolitions, the US supply of office space is on pace to shrink this year for the first time in 25 years, according to real estate services firm CBRE and reporting by The Wall Street Journal. The shift marks a break in a years-long office space glut as federal tax breaks, low interest rates, and unprofitable start-ups fueled office overdevelopment. Matters were made worse as the pandemic reduced demand further. Converting unused offices into residential space seemed like an obvious solution, but until recently, such projects were unprofitable. However, lower property values, local government incentives, and zoning law changes are making conversions practical. While conversions will not reduce office supplies significantly in the short term, they are revitalizing some urban areas by bringing in new residents, which spurs other business development, including entertainment and shopping.
• Private equity firm Blackstone is acquiring $2 billion in discounted commercial real-estate loans from Atlantic Union Bankshares, according to The Wall Street Journal. The latest move by Blackstone adds to its $20 billion spree in the distressed property debt market over the past two years. Many small and regional banks are grappling with depreciated property values for commercial loans they issued when interest rates were low. Many banks have been reluctant to sell troubled properties at a loss, hindering their ability to make new loans. However, Atlantic Union made its recent portfolio sale without recording a loss, thanks to marking the loans to market during its merger with Sandy Spring Bank. Similarly structured mergers among small and regional banks could spur more sales of commercial loan portfolios. Analysts anticipate increased bank consolidation, driven partly by favorable regulatory conditions, though high interest rates and economic uncertainty remain hurdles.

• The U.S. warehouse vacancy rate rose to 7.1% in the second quarter, marking the lowest occupancy in 11 years, according to commercial real estate services firm Cushman and Wakefield and reporting by The Wall Street Journal. The decline in warehouse demand has been partly driven by trade policy uncertainty as the Trump administration has repeatedly shifted tariff plans. Companies used their existing warehouse space to stock up on inventory ahead of the tariff announcements while trimming overseas orders and putting new leasing decisions on hold. Despite weaker demand and growing availability, warehouse rents increased 3% year-over-year, reflecting the rising prevalence of long-term leases in the industrial real estate sector.
• Fitch Ratings’ US CMBS delinquency rate rose by two basis points to 3.10% in June 2025 from 3.08% in May. The June rise was driven by an increase in new office delinquencies, which were partially offset by increased resolution activity and new issuance. Commercial mortgage-backed securities (CMBS) are fixed-income investment products backed by mortgages on commercial properties rather than residential real estate. The delinquency rate is the percentage of commercial real estate loans that were 30 or more days past due or in foreclosure. A rising delinquency rate indicates that an increasing number of commercial property owners cannot pay the mortgages on those properties. Current and prior-month delinquency rates for June and May were: Office: 7.96% (from 7.70% in May); Retail: 3.48% (from 3.81%); Hotel: 3.39% (from 3.18%); Multifamily: 0.93% (from 0.90%); Industrial: 0.65% (from 0.71%); Mixed Use: 4.40% (from 4.35%); Self-storage: unchanged at 0.08%; and Other: 0.99% (from 1.34%).