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As we outlined in the May 5th Commercial Pulse Report, the commercial office space sector has been at the center of economic debate over the past several years. Headlines often focus on rising vacancies, remote work, and uncertainty around the future of office demand. But beneath these structural shifts lies a more nuanced—and in some ways unexpected—story. Despite ongoing pressure on occupancy levels, commercial office space businesses are demonstrating notable financial resilience, particularly when viewed through the lens of commercial credit performance. This divergence between market sentiment and underlying credit health is one of the most important dynamics emerging in today’s commercial landscape. Watch The Commercial Pulse Update A Sector Reshaped by Remote Work The transformation of the office market can largely be traced back to the rapid adoption of remote work. Prior to the pandemic, remote workers accounted for just 6.5% of the workforce. That number surged to 35% during 2020 and has since stabilized at approximately 22%. This shift fundamentally altered demand for office space. Vacancy rates, which were at a low of 11.4% in late 2019, climbed steadily to a peak in 2025. While vacancy levels have begun to stabilize, they remain elevated compared to pre-pandemic norms. For many investors and lenders, this has raised valid concerns about long-term asset performance and cash flow stability. However, vacancy rates alone do not tell the full story. The Pricing Paradox: Rising Rents Amid Higher Vacancies One of the more counterintuitive trends in the office sector is the continued rise in rental pricing. Even as vacancies increased, average asking rents have climbed to over $38 per square foot nationally. This trend is largely being driven by geographic concentration of demand. Major metropolitan areas such as Manhattan and Miami continue to exhibit strong occupancy fundamentals, with vacancy rates below 15% and rental prices significantly exceeding national averages. In effect, the office market is becoming increasingly bifurcated. High-demand, premium locations are maintaining pricing power, while other markets face more pronounced vacancy challenges. For lenders and credit professionals, this reinforces the importance of market-level and asset-level differentiation when evaluating risk. Credit Demand Is Normalizing Another notable shift within the office space sector is how businesses are engaging with credit. Historically, companies operating in this segment exhibited higher levels of credit demand compared to other industries. However, that gap has narrowed considerably in recent years. By early 2026, office space businesses are now seeking commercial credit at rates slightly below those of other sectors. This normalization suggests a maturing post-pandemic environment, where businesses are adjusting to new operating conditions and capital needs. It may also reflect more disciplined borrowing behavior as companies navigate uncertainty around long-term space utilization and revenue models. A Distinct Credit Profile Beyond overall demand, the composition of credit usage within the office space sector also stands out. While commercial cards remain the most widely used credit product across industries, office space businesses show a greater reliance on term loans and lines of credit. At the same time, they maintain relatively lower exposure to commercial cards compared to their peers. This distinction is meaningful. Term loans and lines of credit are often associated with longer-term financing strategies and structured capital needs, whereas commercial cards tend to support shorter-term, operational expenses. The mix suggests that office space businesses may be taking a more strategic approach to capital management. Stronger-Than-Expected Credit Performance Perhaps the most compelling insight from the data is the sector’s risk profile. Despite widespread concerns about office market fundamentals, businesses in this space are outperforming other industries on key credit metrics. Late-stage delinquency rates for office space businesses are approximately 0.27%, compared to 0.70% for other industries—less than half the rate. In addition, these businesses tend to maintain higher average commercial credit scores, further reinforcing the view that they represent a relatively lower-risk segment from a credit standpoint. This combination of lower delinquency and stronger credit scores points to disciplined financial management across the sector, even amid structural disruption. Reconciling Risk Perception vs. Reality The disconnect between perceived risk and actual credit performance raises an important question: why does the sector still feel so risky? The answer lies in the difference between structural market challenges and near-term financial behavior. Elevated vacancy rates, evolving workplace trends, and uncertainty around long-term demand all contribute to a cautious outlook. These are legitimate concerns, particularly for asset valuations and long-duration investments. However, current credit data suggests that many office space businesses are adapting effectively. They are managing debt responsibly, maintaining strong payment performance, and aligning their capital strategies with a changing environment. For credit professionals, this highlights the need to balance macro-level narratives with granular, data-driven insights. What to Watch Going Forward Remote work trends: Will hybrid and remote models continue to suppress demand, or stabilize at current levels? Operating cost pressures: Rising energy prices and inflation may impact both landlords and tenants, influencing margins and credit demand. Market bifurcation: Performance gaps between high-demand metros and weaker markets may widen, increasing the importance of localized risk assessment. Credit discipline: The sector’s strong credit performance will be tested if broader economic conditions weaken. A Sector Defined by Transition—and Resilience The commercial office space market is undeniably in transition. Structural changes driven by remote work have reshaped demand, and elevated vacancies remain a persistent challenge. Yet, the data tells a more balanced story. Strong rental performance in key markets, disciplined credit usage, and low delinquency rates all point to a sector that is more resilient than headlines might suggest. For lenders, risk managers, and commercial credit professionals, the takeaway is clear: understanding today’s office market requires moving beyond surface-level indicators and focusing on the underlying financial behavior of businesses within the sector. Because in this case, the credit data may be telling a very different story than the skyline. Learn more ✔ Visit our Commercial Insights Hub for in-depth reports and expert analysis. ✔ Subscribe to our YouTube channel for regular updates on small business trends. ✔ Connect with your Experian account team to explore how data-driven insights can help your business grow. Download the Commercial Pulse Report Visit Commercial Insights Hub Related Posts

What the Energy Transition Means for Small Business Risk, Cost, and Credit Strategy A structural shift is underway in the U.S. economy—one that is easy to underestimate but increasingly difficult to ignore. Power demand is accelerating at a pace not seen in decades, driven largely by the rapid expansion of AI and data infrastructure. For lenders and risk professionals, this isn’t just an energy story—it’s a credit, cost, and portfolio strategy story. As highlighted in Experian’s latest Commercial Pulse Report (04.21.2026), electricity demand is entering a new phase of sustained growth. Unlike previous cycles, this surge is not temporary—it is structural, capital-intensive, and poised to reshape the operating environment for small businesses over the long term. Watch the Commercial Pulse Update The New Demand Curve: AI as an Energy Catalyst The rise of AI is often framed in terms of productivity and innovation. Less discussed is its physical footprint—specifically, the energy required to power it. Data centers, the backbone of AI infrastructure, are expected to consume more than 600 terawatt-hours of electricity annually by 2030, accounting for over 11% of total U.S. power demand. This represents a dramatic increase in a relatively short period of time. At the same time, overall electricity demand has already been trending upward. In 2025, U.S. electricity consumption was approximately 11% higher than in 2020, reflecting not just AI growth but broader digitalization across industries. For small businesses, the implication is straightforward: energy is no longer a stable, background operating expense—it is becoming a dynamic and increasingly material cost driver. Supply Constraints and the Cost Transmission Effect While demand is accelerating, supply is struggling to keep pace. The energy sector is undergoing a transition away from traditional fossil fuels toward renewable sources such as wind and solar. While renewables offer faster development timelines, they require significant upfront investment and infrastructure upgrades to scale effectively. From 2015 through 2024, U.S. utilities invested approximately $1.3 trillion in capital expenditures, with another $1.1 trillion projected through 2029. These investments are critical—but they are not without cost. Utilities typically recover infrastructure investments through rate increases. As a result, rising capital expenditures are translating directly into higher electricity prices for both consumers and businesses. Since 2021, electricity rates have increased steadily, reflecting the widening gap between demand growth and supply expansion. For small businesses, this creates a cost-transmission effect: large-scale infrastructure investment at the utility level flows downstream into operating expenses, compressing margins—particularly for energy-intensive industries. A More Capital-Intensive Sector—and Why That Matters for Credit From a credit perspective, the electric energy sector presents a distinct and increasingly important profile. Experian data shows that businesses within the sector are significantly more capital-intensive than the broader market. Average commercial balances per business are roughly four times the cross-industry average, reflecting the scale of investment required to build and maintain energy infrastructure. Financing structures also differ. The sector relies more heavily on term loans and leases—products aligned with long-duration, asset-heavy investments—than on revolving credit, which is typically used for working capital. At the same time, demand for credit in the sector has been rising. Credit-active businesses have grown faster than the broader market, and inquiry activity has accelerated, particularly over the past two years. For lenders, this signals two key dynamics: Sustained demand for structured financing products tied to infrastructure and equipment Increased exposure to a sector with elevated capital requirements but improving fundamentals Improving Credit Quality Amid Higher Leverage One of the more notable trends is that credit quality within the energy sector has improved, even as borrowing remains elevated. Severe delinquency rates—accounts 90+ days past due—have declined materially and now sit well below the broader market. This suggests that, despite higher leverage and utilization, businesses in the sector are managing their obligations effectively. This divergence is important. While many sectors have faced rising credit pressure in recent years, the energy sector appears to be strengthening, supported by consistent demand and long-term investment flows. For risk teams, this creates a more nuanced view of exposure. Higher balances do not necessarily equate to higher risk—particularly in sectors where revenue visibility and demand fundamentals are strong. The Small Business Impact: Margin Pressure Meets Strategic Adjustment For small businesses outside the energy sector, the implications are less about opportunity and more about adaptation. Rising electricity costs are likely to become a persistent headwind. Unlike one-time shocks, this pressure is tied to long-term structural changes in demand and infrastructure investment. As a result, businesses may need to rethink how they manage energy as part of their broader financial strategy. Key considerations include: Pricing strategy: Passing through higher costs where possible without eroding demand Expense management: Identifying efficiencies to offset rising utility expenses Capital planning: Evaluating investments in energy efficiency or alternative solutions Liquidity management: Ensuring sufficient flexibility to absorb cost volatility For lenders, these dynamics will increasingly show up in credit performance—not necessarily as immediate distress, but as gradual margin compression that can impact repayment capacity over time. Why This Matters Now The most important takeaway is that this is not a short-term cycle. The convergence of AI growth, infrastructure investment, and energy transition is creating a durable shift in both cost structures and credit demand. Energy is becoming a strategic variable—one that influences everything from operating margins to borrowing needs. For CROs and risk leaders, this reinforces the importance of: Monitoring sector-specific cost pressures Incorporating energy exposure into risk models Understanding capital intensity differences across industries Leveraging data-driven insights to identify emerging opportunities and risks The energy sector itself may present attractive lending opportunities, given its strong demand outlook and improving credit profile. At the same time, rising energy costs will act as a secondary pressure across portfolios, particularly among small and mid-sized businesses. Final Thought Power demand is no longer just an infrastructure story—it’s a credit story. As AI continues to scale and the energy transition accelerates, the effects will ripple across industries, balance sheets, and lending strategies. Those who understand these dynamics early will be better positioned to manage risk, identify opportunity, and support small businesses navigating an increasingly complex cost environment. Learn more ✔ Visit our Commercial Insights Hub for in-depth reports and expert analysis. ✔ Subscribe to our YouTube channel for regular updates on small business trends. ✔ Connect with your Experian account team to explore how data-driven insights can help your business grow. Download the Commercial Pulse Report Visit Commercial Insights Hub Related Posts

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For many Chief Risk Officers, credit portfolio management can feel like a constant exercise in damage control. A spike in delinquencies is reported in the monthly update. A sector suddenly underperforms. The board asks whether the risk appetite still holds, after the fact. This reactive posture isn’t the result of poor risk discipline. It’s the result of portfolio management approaches built for a slower, more predictable credit environment. Today’s commercial and small business portfolios move faster, fragment across industries, and respond quickly to macro and behavioral shifts. To stay ahead, CROs must evolve credit portfolio management from firefighting to forecasting. Why Traditional Credit Portfolio Management Keeps CROs in Reaction Mode   Many portfolio management programs still rely on legacy practices: - Lagging indicators such as delinquency and charge-off trends- Static, periodic reporting rather than continuous insight- Limited segmentation that masks pockets of emerging risk- Manual analysis that slows decision-making The result is a cycle CROs know well: risk becomes visible only once it has already materialized. By then, options are fewer, and corrective actions are more disruptive to growth and customer relationships. In volatile economic conditions, especially within small business portfolios, this approach exposes institutions to unnecessary risk and earnings volatility. The CRO’s Mandate Has Changed   Modern CROs are no longer measured solely on loss avoidance. They are expected to: - Enable profitable growth while maintaining discipline- Translate risk appetite into day-to-day decisions- Anticipate risk before it shows up in losses- Communicate forward-looking insights to executives and boards That requires a fundamentally different approach to credit portfolio management; one that emphasizes early signals, segmentation, and scenario analysis, not just historical performance. What “Forecasting” Looks Like in Credit Portfolio Management A forecasting-oriented portfolio management framework rests on four pillars:   Risk Appetite That Is Operational, Not Theoretical Effective forecasting starts with a clearly defined risk appetite that is embedded into portfolio segmentation, exposure limits, score bands, and monitoring thresholds. CROs move beyond static policy statements to measurable guardrails that guide growth and risk-taking in real time.   Granular, Dynamic Portfolio Segmentation Rather than viewing the portfolio as a single aggregate, CROs segment by:Industry and geographyBusiness size and lifecycle stageCredit score bands and blended risk profilesProduct, tenure, and exposure concentrationThis level of segmentation allows risk leaders to spot early deterioration in specific pockets, before it becomes a portfolio-wide issue.   Early-Warning Signals and Ongoing Monitoring Forecasting depends on identifying changes in behavior, not just outcomes. Shifts in payment performance, utilization, score trends, or public records provide valuable signals that risk is evolving. When these signals are monitored continuously and tied to clear action thresholds, CROs gain time, the most valuable asset in risk management.   Scenario Analysis and Forward-Looking Analytics True forecasting requires asking “what if?”• What happens if rates stay higher for longer?• What if a key sector experiences a sudden demand shock?• How would losses and capital needs change under stress?Forward-looking portfolio analytics allow CROs to test assumptions, model outcomes, and guide strategic decisions before conditions deteriorate.   Turning Portfolio Data Into Predictive Insight One of the biggest challenges CROs face is not a lack of data, but a lack of integrated analytics that turn data into insight. Portfolio forecasting requires: Access to high-quality commercial and small business data The ability to blend internal performance data with external risk indicators Flexible analytics environments where teams can test, validate, and refine models Dashboards that surface trends and outliers without weeks of custom reporting This is where modern analytics platforms become essential. How Experian Supports Predictive Credit Portfolio Management Experian’s Ascend Commercial Suite™ is designed to help risk leaders move beyond static portfolio reviews toward continuous, insight-driven portfolio management. Ascend Commercial Suite is an integrated analytics platform that brings together data, modeling, benchmarking, and portfolio analysis in a single environment. Key capabilities that support forecasting-oriented portfolio management include: Portfolio Performance Monitoring and DashboardsAscend enables risk teams to create interactive dashboards that are directly connected to portfolio and market data. This allows CROs to: Monitor portfolio performance continuously Identify emerging areas of strength or concern Reduce reliance on manual, recurring reports Advanced Analytics and Model Development With access to Experian’s proprietary commercial and small business data, along with client-owned data, risk teams can: Develop and validate new credit and risk models Monitor existing models for performance and stability Meet regulatory expectations for ongoing model validation Blended and Small Business Risk Analysis For portfolios that rely on personal guarantees or serve small and micro businesses, Ascend supports blended analysis using both commercial and consumer credit data. This provides a more complete view of risk and supports more accurate segmentation and forecasting. Benchmarking and Peer Analysis Ascend’s benchmarking capabilities allow CROs to compare portfolio performance against peer populations and market segments, helping to contextualize risk trends and identify opportunities for adjustment before performance diverges materially. Together, these capabilities help CROs replace reactive portfolio reviews with proactive, data-driven risk steering. "Looking at how similar businesses performed across the broader market helped us move from reactive decisions to forward-looking ones, especially when evaluating new segments and understanding expected loss rates before expanding." Arun Narayan, Chief Product Officer From Firefighting to Confidence When credit portfolio management is built around forecasting rather than reaction, CROs gain: Earlier visibility into emerging risk Smoother, more deliberate policy adjustments Greater confidence in growth strategies Stronger, more credible communication with boards and regulators The goal isn’t to eliminate risk, that’s impossible. The goal is to see risk forming early enough to manage it on your terms. Talk with Experian’s commercial risk experts about strengthening your credit portfolio management strategy with forward-looking analytics and insights. Get In Touch Learn more about how Experian Ascend Commercial Suite can help you monitor, analyze, and forecast portfolio risk with confidence. Learn more Related Posts

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