Office Credit Scores

The challenges are piling up in front of office owners. The latest? The threat of major credit downgrades for even leading real estate investment trusts. Also, retailers did not need a wave of organized theft coming out of the pandemic. But that’s what they got. Here’s who’s doing the stealing and how stores are combating it.

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— Tom Acitelli, Co-Deputy Editor

The Latest Problem for Office REITs: Credit Downgrades

Real estate investment trusts (REITs) have already lost some of their credibility in the stock market, and now they’re losing it with lenders. Office REITs have faced slow leasing, high interest rates and dwindling stock prices, but now several have had their credit ratings downgraded over the past year and more could be on the way, with Moody’s Investors Service placing SL Green Realty’s rating on watch for a downgrade May 22, thanks to its high debt load and large New York City office holdings. Credit downgrades signal a higher likelihood of a firm defaulting on its obligations and can also hamstring a REIT’s ability to land a new loan or refinance existing debt, potentially contributing to that default risk, said Tomasz Piskorski, a professor of real estate at Columbia University Business School. “This is not something to take lightly,” Piskorski said.

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Organized Retail Crime: Store Owners Did Not Need This

Forget shoplifting. That’s bad enough. As far as retailers and their lobbyists are concerned, the much bigger illegal threat is organized retail crime. They’re leaning on federal lawmakers to make it easier to curb such crime, which individual retailers and their groups say cost hundreds of millions — maybe billions — of dollars annually. They’re also figuring out on their own how the crime actually gets committed. In an April report, the National Retail Federation (NRF) said the average “shrink rate” — the amount of inventory lost for whatever reason — was 1.4 percent in 2021. Stated as dollars and cents, that’s $94.5 billion, up from $90.8 billion the previous year. That number is “primarily driven” by theft, including organized theft. Retailers on average saw a 26.5 percent annual increase in this kind of theft, and eight out of 10 retailers surveyed reported that violence and aggression related to organized thefts rose in the past year.

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