New research from Yardi Matrix reveals potential distress in many office markets, despite the lack of a predicted wave of office distress. The firm’s report states that debt service coverage ratios have decreased for office properties due to rising interest rates and declining cash flow. However, only a few markets show widespread risk based on average DSCRs, with five out of 91 analyzed markets having ratios below 1.0 and eight others at or below the typical lender requirement of 1.25.
It should be noted that these market-level rates are estimates and individual property DSCRs can vary significantly within each market. While some properties in low-average-DSCR markets continue to perform well, others in high-average-DSCR areas may face potential distress.
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