• On November 6th, co-working trailblazer WeWork filed for Chapter 11 bankruptcy, bringing additional
unease to an office sector battered from the residual effects of the remote-work revolution.
• Over the previous decade, including before the pandemic, many office landlords around the world looked
to the co-working giant as the future of office life, with leasing to the firm proliferating across many
global economic hubs. However, as those bets soured in recent years, owners have increasingly turned to
debt financing to stay afloat, raising concerns that a reduction of leased space by WeWork could place a
wave of distress on a sector already facing high vacancy rates.
• There are also concerns about the ripple effect of the bankruptcy on small and mid-sized banks, which are
disproportionally exposed to commercial property debt on their balance sheets. Still, US banks remained
highly liquid, limiting the risk of the CRE exposure to the broader financial system.
• Notably, many WeWork leases are in Class B buildings, which predictably have had a tougher challenge
with occupancy compared to Class A buildings during the current downturn. This may increase the
challenge that landlords will face in filling new vacancies. So far, WeWork has filed to terminate nearly 70
leases worldwide.
• According to the MSCI RCA Commercial Property Price Index (CPPI), all US commercial sectors posted
annual price declines in September, matching August’s -9.0% year-over-year drop. However, average
prices were flat month-over-month, potentially signaling that we are close to the cyclical nadir for
commercial prices.
• The apartment sector posted the most significant year-over-year decline in CRE for the second straight
month, but declines in the sector have eased in the third quarter compared to earlier this year. Apartment
prices fell by -0.3% month-over-month and -12.8% year-over-year in September.
• The industrial sector, which has been the best-performing CRE sector during both the pandemic-era
boom and the current market downturn, fell -0.8% annually but climbed 0.2% month-over-month from
August. The directional shift of the sector in September may serve as another signal that commercial
prices are reaching their floor.
• Retail prices were down -0.1% from August and -6.9% year-over-year. Meanwhile, suburban offices fell
NOVEMBER 10, 2023

Read the full report here.