A whopping 70% of CRE professionals recently surveyed by Trepp say they think the office sector will see the biggest uptick in distress for the remainder of the year, and 83% said CRE/CMBS delinquencies will worsen over the next six months.

Overall, "the prevailing sentiment is that a variety of adverse conditions will impact business, but commercial real estate and the broader financial markets will avoid worst-case scenarios," Trepp analysts write in an analysis of their 2022 CRE sentiment survey. "When asked about the current conditions of the markets, most respondents indicated headwinds were outpacing tailwinds. More than half said that economic conditions and higher interest rates would impact their businesses negatively…Not surprisingly, inflation, higher interest rates, and supply chain constraints were the biggest macro concerns in the survey."

Participants in the survey were more optimistic about leasing activity versus sales activity, with more than half of the audience saying CRE fundamentals will be somewhat worse over the next six months but just 6% saying conditions would be significantly worse.  Three-quarters believe net effective rents will decline, with 25% of those saying the decline will be severe. And nearly 53% say CRE fundamentals will worsen somewhat.