By Matt Tracy

(Reuters) -The delinquency rate among U.S. office loans rose in June, driven in part by increasing vacancies and elevated interest rates, according to recent reports from ratings agencies.

Echoing trends over the last two years, the higher interest rates have contributed to rising late payments and defaults on loans behind offices and other commercial real estate (CRE) properties so far in 2024.

The overall rate of delinquencies, or late payments, on loans behind commercial mortgage-backed securities (CMBS) rose to 2.45% in June from 2.42% in May, according to a report by Fitch Ratings released on Friday. The volume of 30-day delinquencies increased to $1.92 billion from $1.86 billion over the same period.

The post-pandemic work-from-home trend has led to pronounced trouble among office loans in particular. Office loans made up 55% ($1.05 billion) of 30-day delinquent loans last month, after accounting for 45% in May, the report said.

Three of the largest newly late loans last month were backed by offices, according to the report.

The volume of loans newly 60 or more days’ delinquent ticked up to $1.35 billion last month, slightly higher than $1.32 billion in May, Fitch noted. There were 514 loans worth $13.7 billion reported at least 60 days delinquent, in foreclosure, did not sell at foreclosure auction or matured and non-performing.

A $244 million loan behind the Illinois Center, a two-tower office property in Chicago, became 60 days delinquent last month, the report said. A $120 million loan behind 10 office buildings in Mountain View, California, defaulted at maturity.

Office vacancies hit a record 20.1% in the second quarter, Moody’s (NYSE:) Ratings said in a July 3 report. It was the third consecutive quarter that the vacancy rate broke the previous record and the first time ever that office vacancies reached 20%.

“The slow bleed occurring in the office sector has led to a steady rise in the vacancy rate as permanent shifts in working behavior have outlasted the initial wave of the pandemic four years ago,” Moody’s analysts wrote in their report.