As the undeniable permanence of remote and hybrid work takes hold, the profound impact on the office sector is becoming increasingly clear. Vacancies are rising and values are falling, and it’s all happening in an era of higher interest rates and tightened credit. Banks are taking notice of the distress within commercial real estate, and in some cases, with their own office loan portfolios, they’re bracing for losses.
Morgan Stanley reported its financial results for the second quarter of 2023 this week, which stated: “increases in provisions for credit losses were primarily driven by credit deteriorations in the commercial real estate sector as well as modest growth across the portfolio.” Morgan Stanley’s provision for credit losses rose from $82 million in the second quarter of last year to $97 million, where it currently stands.
