Another segment of lenders is pulling back from the office market, putting yet another dent in the financing options available to owners with debt coming due.

A growing number of life insurance companies, which hold about 15% of the $4.5T in U.S. debt backed by commercial real estate, plan to minimize office lending in 2023, according to a new report from The Wall Street Journal.

The pullback comes as $270B worth of commercial mortgages held by banks are set to expire this year, Trepp data shows, nearly a third of them tied up in office properties.

“The trillion-dollar question today is what is the value of an office building,” Anant Bhalla, CEO of American Equity Investment Life Holding Co., told the WSJ. “We think it is very hard to know what normal is in the office market, post-Covid.”

The life insurance industry closed out 2022 with some of the worst returns on property mortgages since 2008, according to The Real Deal, causing some to worry that firms would reduce exposure by scaling back CRE lending in 2023.

Those fears appear to have materialized. A February survey from Goldman Sachs Asset Management found that 15% of insurers with CRE lending businesses said that they plan to shrink their activity this year, more than three times as many as those surveyed last year, according to the WSJ.

The failures of Silicon Valley Bank and Signature Bank in March put an already-tenuous lending environment on even shakier ground.

The subsequent retreat of regional banks and now life insurers has kick-started demand for shadow lenders, including private credit funds that lend their own cash and charge more interest.