Defaults and vacancies are on the rise at high-end office buildings, in the latest sign that remote work and rising interest rates are spreading pain to more corners of the commercial real-estate market.

For much of the pandemic, buildings in central locations that feature modern amenities fared better than their less-pricey peers. Some even were able to increase rents while older, cheaper buildings saw surging vacancy rates and plummeting values. Now, these so-called class-A properties, whose rents generally fall into a city's top quartile, are increasingly coming under pressure.

The amount of U.S. class-A office space in central business districts that is leased fell in the fourth quarter of last year for the first time since 2021, according to Moody's Analytics. The owners of a number of high-end properties recently defaulted on their mortgages, highlighting the financial strain from rising interest rates and vacancies.

'Any property owner that says 'Oh we're fine' is a little bit fooling themselves,' said Thomas LaSalvia, director of economic research at Moody's Analytics.

wsj.com - Distress in office market spreads to high end buildings