Lease Expirations and CRE Property Performance Lease Expirations and CRE Property Performance

By David Glancy and J. Christina Wang

The pandemic-induced shift to remote work appears to have led to a large and persistent decline in the demand for office space, especially in central business districts (CBDs). On the other hand, the deterioration in commercial real estate (CRE) loan performance has been relatively modest to date, as long-term leases have shielded commercial-property owners from the effects of diminished demand for space to a fair degree. To shed light on how these properties will perform in the longer term as more leases expire, this paper analyzes how lease expirations have affected property performance historically and investigates how these patterns have changed so far for leases that have expired since the COVID-19 outbreak.

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