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 face a financing gap of $72.7 billion (26.4% 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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