DBRS Morningstar: CMBS European Office Sector and the Impact of Flexible Working

May 26, 2022 7:01 AM EDT

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LONDON--(BUSINESS WIRE)-- This commentary looks at the European office sector and the impact on offices in CMBS following the challenges of the Coronavirus Disease (COVID-19) pandemic and evolving trends for flexible working patterns.

“Although the reported fall in office take-up figures and the increase in vacancy rates suggest a downward trend in the market, the reported numbers are largely explained by the absence of any occupier movement during the lockdown period, causing delays to occupier take-up and a slight increase in supply. We believe that infrastructure, the surrounding amenities, and the focus on buildings with green or social credentials will play a much larger role in getting people back into the offices,” said Dinesh Thapar, Vice President of European CMBS at DBRS Morningstar

DBRS Morningstar believes the credit outlook for CMBS transactions secured by office properties remains stable with some headwinds that are not yet reflected in the data. The pandemic abruptly changed office worker behaviours and some remain attached to the flexibility of working from home. Employers are encouraging workers back to the office using a carrot-and-stick approach. Environmentally friendly spaces with better and modern infrastructure is the softer-touch approach observed in some jurisdictions in Europe. On the flip side, the rising cost of living and certain habitual attributes of working from home are hard to overcome in a market where more jobs are on offer and unemployment is at an all-time low. DBRS Morningstar anticipates that while demand for office space is likely to decline, occupier demand for Grade A, smart, sustainable offices will grow and lease lengths for this type of product will remain long in nature. We will continue to see a further widening between Grade A prime sustainable office space and subprime offices, with ESG credentials (particularly environmental credentials but also social factors) increasingly becoming a differentiator. This could open further opportunities to value-add investors with business plans to upgrade older office space and achieve higher rents, particularly in an environment of increasing interest rates that could affect cash-on-cash returns.

To view the full report, click here: https://www.dbrsmorningstar.com/research/397313/cmbs-european-office-sector-and-the-impact-of-flexible-working

The DBRS Morningstar group of companies consists of DBRS, Inc. (Delaware, U.S.)(NRSRO, DRO affiliate); DBRS Limited (Ontario, Canada)(DRO, NRSRO affiliate); DBRS Ratings GmbH (Frankfurt, Germany)(EU CRA, NRSRO affiliate, DRO affiliate); and DBRS Ratings Limited (England and Wales)(UK CRA, NRSRO affiliate, DRO affiliate). For more information on regulatory registrations, recognitions and approvals of the DBRS Morningstar group of companies, please see: https:// www.dbrsmorningstar.com/research/highlights.pdf.

The DBRS Morningstar group of companies are wholly-owned subsidiaries of Morningstar, Inc. © 2021 DBRS Morningstar. All Rights Reserved.

The information upon which DBRS Morningstar ratings and other types of credit opinions and reports are based is obtained by DBRS Morningstar from sources DBRS Morningstar believes to be reliable. DBRS Morningstar does not audit the information it receives in connection with the analytical process, and it does not and cannot independently verify that information in every instance. The extent of any factual investigation or independent verification depends on facts and circumstances. DBRS Morningstar ratings, other types of credit opinions, reports and any other information provided by DBRS Morningstar are provided “as is” and without representation or warranty of any kind. DBRS Morningstar hereby disclaims any representation or warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability, fitness for any particular purpose or non-infringement of any of such information. In no event shall DBRS Morningstar or its directors, officers, employees, independent contractors, agents and representatives (collectively, DBRS Morningstar Representatives) be liable (1) for any inaccuracy, delay, loss of data, interruption in service, error or omission or for any damages resulting therefrom, or (2) for any direct, indirect, incidental, special, compensatory or consequential damages arising from any use of ratings and rating reports or arising from any error (negligent or otherwise) or other circumstance or contingency within or outside the control of DBRS Morningstar or any DBRS Morningstar Representative, in connection with or related to obtaining, collecting, compiling, analyzing, interpreting, communicating, publishing or delivering any such information. No DBRS Morningstar entity is an investment advisor. DBRS Morningstar does not provide investment, financial or other advice. Ratings, other types of credit opinions, other analysis and research issued or published by DBRS Morningstar are, and must be construed solely as, statements of opinion and not statements of fact as to credit worthiness, investment, financial or other advice or recommendations to purchase, sell or hold any securities. A report with respect to a DBRS Morningstar rating or other credit opinion is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. DBRS Morningstar may receive compensation for its ratings and other credit opinions from, among https://www.dbrsmorningstar.com/disclaimer/ others, issuers, insurers, guarantors and/or underwriters of debt securities. DBRS Morningstar is not responsible for the content or operation of third party websites accessed through hypertext or other computer links and DBRS Morningstar shall have no liability to any person or entity for the use of such third party websites. This publication may not be reproduced, retransmitted or distributed in any form without the prior written consent of DBRS Morningstar. ALL DBRS MORNINGSTAR RATINGS AND OTHER TYPES OF CREDIT OPINIONS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AT https://www.dbrsmorningstar.com/about/disclaimer. ADDITIONAL INFORMATION REGARDING DBRS MORNINGSTAR RATINGS AND OTHER TYPES OF CREDIT OPINIONS, INCLUDING DEFINITIONS, POLICIES AND METHODOLOGIES, ARE AVAILABLE ON https://www.dbrsmorningstar.com. Users may, through hypertext or other computer links, gain access to websites operated by persons other than DBRS Morningstar. Such hyperlinks are provided for convenience only, and are the exclusive responsibility of the owners of such websites. DBRS Morningstar does not endorse the content, the operator or operations of third party websites. DBRS Morningstar is not responsible for the content or operation of such websites and DBRS Morningstar shall have no liability to you or any other person or entity for the use of third party websites.

The English version of this press release prevails.

Dennis Ferreira – [email protected]

Source: DBRS Morningstar



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