Investors Retreat From Commercial Real Estate Bonds

Prices of bonds backed by commercial mortgages have recently dropped to levels not seen since the early days of the pandemic, pointing to a growing economic threat stemming from office vacancies and rising interest rates.

A small corner of the U.S. bond market, so-called commercial-mortgage-backed securities, or CMBS, have taken a beating for over a year owing to fears that owners of business parks, high-rises and other office properties could default on loans extended at a time of different work habits and lower financing costs.