Lease expirations are one of the biggest threats to the loan market, according to a new analysis from Trepp. And that's especially true for the office sector: nine major leases are set to expire in the coming months.

"The debate (is) fierce between those that believed office attendance would revert to pre-COVID levels over time and those that believed a hybrid model or permanent work-from-home would be the new normal," Trepp's Jack LaForge notes. "That debate is still unsettled, but many firms are opting to sublease space in the short term in order to avert costs in the remaining months of their lease. However, when those leases expire, firms will have a decision to make, and we have already seen dribbles of what looming lease expirations can do to the performance of loans."

LaForge notes that the $88 million 1384 Broadway loan was recently added to the servicer watchlist. The collateral is a 220,927-square-foot office in Manhattan's Midtown West and in 2021, the loan posted a DSCR (NCF) of 1.91x when occupancy was 77%. Occupancy increased to 80% in the first half of 2022 but DSCR tumbled to 0.73x. Watchlist notes state there are 11 tenants with near-term lease expirations representing 8.5% of the GLA, according to LaForge.

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