{"id":21370,"date":"2024-02-08T18:12:53","date_gmt":"2024-02-08T18:12:53","guid":{"rendered":"https:\/\/www.thinkadvisor.com\/2024\/02\/08\/more-pain-coming-for-u-s-office-market-prudential\/"},"modified":"2024-02-08T18:12:53","modified_gmt":"2024-02-08T18:12:53","slug":"more-pain-coming-for-u-s-office-market-prudential","status":"publish","type":"post","link":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/2024\/02\/08\/more-pain-coming-for-u-s-office-market-prudential\/","title":{"rendered":"More Pain Coming For U.S. Office Market: Prudential"},"content":{"rendered":"<div class=\"media_block\"><a href=\"https:\/\/feeds.feedblitz.com\/-\/869355533\/0\/thinkadvisor\/\"><img decoding=\"async\" src=\"https:\/\/images.thinkadvisor.com\/contrib\/content\/uploads\/sites\/415\/2023\/09\/2023-9-21-Rob-Falzon-61893-Final2_Prudential_640x640.jpg\" class=\"media_thumbnail\"><\/a><\/div>\n<div><img decoding=\"async\" src=\"https:\/\/images.thinkadvisor.com\/contrib\/content\/uploads\/sites\/415\/2023\/09\/2023-9-21-Rob-Falzon-61893-Final2_Prudential_640x640.jpg\" class=\"ff-og-image-inserted\"><\/div>\n<div class=\"the-advisor bullet-summary\">\n<h3>What You Need to Know<\/h3>\n<ul>\n<li>For Prudential, other property types have made up for the ongoing office building slump. <\/li>\n<li>A top executive expects high-quality commercial prices to fall to less than 60% of their peak value.<\/li>\n<li>The insurance company reported higher earnings on higher revenue for the fourth quarter.<\/li>\n<\/ul>\n<\/div>\n<p id=\"first-para\">A Prudential Financial executive predicted Wednesday that office prices will continue to drop before finally starting to recover.<\/p>\n<p>Robert Falzon, Prudential\u2019s executive vice chairman, estimated that prices for high-quality commercial properties have already dropped 16% since the current slump began and might bottom out at around 20% below the peak prices.<\/p>\n<p>\u201cOffice, obviously, has corrected much more severely,\u201d Falzon said. \u201cCloser to 30% to date, and probably has another 10% to 15% yet to go.\u201d<\/p>\n<p>Office mortgages account for only about $8.4 billion of Prudential\u2019s $721 billion in assets, and the strong performance of other types of commercial properties helped to increase the value of all properties in the portfolio by about 6% in 2023, Falzon noted.<\/p>\n<p><strong>What it means:<\/strong> Office buildings and their mortgages account for only a small portion of the investment portfolios supporting clients\u2019 life insurance and annuities.<\/p>\n<p>But life insurance company executives are in a good position to talk candidly about office market trends.<\/p>\n<p><strong>The office slump: <\/strong>The United States has about $6 trillion in commercial real estate loans of all kinds outstanding, according to the <a href=\"https:\/\/home.treasury.gov\/system\/files\/261\/FSOC2023AnnualReport.pdf\" target=\"_blank\" rel=\"noopener\">Financial Stability Oversight Council<\/a>.<\/p>\n<p>The U.S. office market is suffering from the lingering effects of the COVID-19 pandemic on office occupancy rates, tougher bank capital requirements and the effects of higher interest rates on efforts by property owners to replace existing mortgage loans with new loans.<\/p>\n<p>Prices peaked in early 2022 and have been dropping ever since.<\/p>\n<p>Analysts at Fitch estimated in late 2023 that&nbsp; only about half of the office building owners with mortgage loans maturing this year <a href=\"https:\/\/www.thinkadvisor.com\/2023\/11\/06\/aflac-exec-assesses-slump-in-office-building\/\" target=\"_blank\" rel=\"noopener\">will be able to refinance their mortgages<\/a> without getting loan modifications or other special arrangements.<\/p>\n<p><strong>Falzon\u2019s view: <\/strong>Securities analysts, credit rating agency analysts and others have been eager to see what really happens when office building owners try to refinance mortgage their mortgages.<\/p>\n<p>Falzon told securities analysts that about $2 billion of the commercial mortgage-backed securities in Prudential\u2019s portfolio matured in 2023, and about $3 billion will mature this year.<\/p>\n<p>In 2023, Prudential provided modifications for four of the borrowers, accounting for about $400 million in loan value.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What You Need to Know For Prudential, other property types have made up for the ongoing office building slump. A top executive expects high-quality commercial prices to fall to less than 60% of their&#46;&#46;&#46;<\/p>\n","protected":false},"author":1,"featured_media":21371,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[1],"jetpack_featured_media_url":"https:\/\/blog.lifeinsurance-orleans.ca\/wp-content\/uploads\/2024\/02\/more-pain-coming-for-u-s-office-market-prudential.jpg","_links":{"self":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/21370"}],"collection":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/comments?post=21370"}],"version-history":[{"count":0,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/21370\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media\/21371"}],"wp:attachment":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media?parent=21370"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/categories?post=21370"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/tags?post=21370"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}