Office cash flow gap widens as CMBS expense pressure holds across every region

Against the backdrop of refinancing pressure building sector-wide, office properties in commercial mortgage-backed securities have been running costs faster than income for five straight years. Trepp's analysis of its CMBS property sample found that median expense growth outpaced revenue growth in every year from 2021 through 2025, leaving median net operating income up just 0.2% on an implied annualized basis.

The numbers are precise. Implied annualized operating expense growth came to 2.7% across the five-year sample. Revenue grew 1.3%. The widest annual gap appeared in 2022 at 2.3 percentage points. It narrowed to 0.3 points in 2023, then reopened to 1.4 points in both 2024 and 2025. Median NOI growth was negative in 2021, 2024, and 2025.

The cost lines driving the spread

Property insurance recorded the fastest implied annualized expense growth at 6.1%. Utilities followed at 4.9%, then payroll and benefits at 3.3%, repairs and maintenance at 3.2%, and general and administrative costs at 2.7%. Real estate taxes, at 1.1%, were the one expense category growing below the 1.3% revenue rate.

In 2025, insurance cost growth slowed sharply to 3.3% from 5.8% the prior year. Utilities moved the opposite direction, accelerating to 6.7% from 2.0%. Base rent income posted 1.6% implied annualized growth over the period, while other income declined 3.8%.

Refinancing read-through in a high-cost environment

The cash-flow picture carries a direct read-through for refinancing capacity across the broader cycle. Trepp illustrated the constraint: chaining annual net cash flow medians produced an implied five-year increase of only 1.1%. Applied to an interest-only loan at an 8.00% debt yield, that increase would lift the debt yield to approximately 8.09%. Trepp was explicit that this is not an observed median loan, but the arithmetic shows why thin NOI growth limits the refinancing cushion available to borrowers.

Lenders evaluating these loans consider loan-to-value ratios, debt-service coverage, interest rates, amortization requirements, and proceeds tests alongside cash flow. Trepp described the NOI pattern as offering limited additional refinancing support.

The regional picture adds granularity the national medians hide. All seven Census divisions with sufficient sample size showed expenses growing faster than revenue. The gap ran from 0.8 percentage points in New England to 1.6 points in East North Central. Among the five largest markets combined, expenses grew 2.9% against 1.3% revenue, with NOI down 0.1%. Los Angeles led with 2.5% implied annualized revenue growth and 1.3% NOI growth. Chicago posted the weakest reading: revenue down 0.7%, NOI down 1.9%. New York recorded 1.0% revenue growth alongside negative 0.6% NOI growth.

Trepp's broader view is cautious. The 2025 moderation in operating expense growth did not lift median NOI, and the eligible sample shrank from 3,599 properties in 2021 to 2,266 in 2025. On balance, Trepp noted that the implied growth rates are not a fixed-cohort series and that loan-level underwriting remains necessary to translate these trends into actual refinancing capacity.

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