Executive Summary

• Commercial properties face funding gaps when investors are forced to refinance at a loan-to-value (LTV) ratio lower than the one at which they first borrowed or when the value has fallen since the loan was originated.
• The United States office sector faces a large aggregate future funding gap in the near-term due to lower LTVs and substantial value erosion.
• Between 2023-2025, CBRE Econometric Advisors (CBRE EA) forecasts office owners will have a financing gap of $52.9 billion (19.3% of the lending volume originated in 2018-2020). This will likely lead to distress for some property investors and force others to inject more cash into their properties.
• The heavy concentration in the office sector differentiates the current funding gap from the Global Financial Crisis (GFC) when large funding gaps were prevalent across all major sectors.

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