W
orkspace Property Trust's billion-dollar gamble on suburban offices has hit a snag, with one of its major loans landing in special servicing due to imminent maturity default. The $1.2 billion loan is backed by several of the company's sprawling office campuses and is now the largest securitized office loan in special servicing.

    Two years ago, Workspace co-founder Thomas Rizk predicted that companies would flock to suburban offices for a safe, accessible, and flexible work environment. However, despite being better than city centers in terms of vacancy rates, suburban offices still saw significant increases in vacancies, climbing to 17% by January from 12.2% in 2020.

    Workspace's own portfolio has also suffered, with occupancy dropping to 76% this summer from 80% at the end of 2022. The company had acquired a rate cap to mitigate the impact of rising interest rates but still struggled to cover monthly mortgage payments. Workspace is now seeking a workout that would give it time to bolster tenancy.

    A Moody's report noted that while employees' desire for shorter commutes has driven steady performance in suburban offices, this trend may be short-lived and not a long-term solution for office woes. The company had previously canceled plans for an initial public offering due to investors' doubts about the viability of suburban offices.