DBRS Morningstar 2023 Global Outlook for REITs and REOCs: Rising Risks for Office

DBRS Morningstar released a commentary titled “2023 Global Outlook for REITs and REOCs: Rising Risks for Office.” DBRS Morningstar anticipates rating actions in 2023 will be neutral to modestly negative, consistent with slowing economic momentum and the resulting modestly increasing credit risk. We anticipate that debt-financed growth will be tempered and total leverage levels will decline as issuers attempt to keep pace with rising risks, though at a lag.

Going into 2023, ratings are generally better placed within respective rating categories than in prior years. Of the real estate sectors covered by DBRS Morningstar, the office sector is most susceptible to negative rating actions because of the headwinds unique to the sector as well as relatively elevated leverage levels.