The commercial real estate sector in the United States is grappling with a surge in distressed assets, with the value of these assets reaching around $64 bn in the first quarter of this year, Invest-Gate reports.

According to a new report from MSCI Real Assets, the volume of distressed assets increased by 10% in the first three months of the current year, and potential risks still loom on the horizon, with the report indicating the possibility of further distress in commercial real estate assets approaching a value of $155 bn.

Most of the anticipated distress is associated with properties needing refinancing when lending institutions tighten credit conditions following the collapse of several regional banks.

Retail properties, such as shopping malls, are the most distressed among property types, with distressed assets in the sector reaching approximately $23 bn. According to the report, office units totaling around $18 bn were considered distressed as of the end of March.

Office units, which also suffer from reduced demand due to increased remote work and employee layoffs, account for approximately $43 bn of the expected distress, the largest value among all sectors. Office units face a greater wave of maturing debt, while the report indicates that distress in the retail real estate sector has begun to recede.

Noteworthy that Manhattan was the most active market in distressed asset sales during the twelve months ending in May, with deals worth $2.6 bn, accounting for 19% of real estate transactions in the United States. Los Angeles ranked second with transactions worth $746 mn, followed by Houston with $465 mn in distressed asset transactions, according to MSCI Real Assets.