A: There are both risks and opportunities in commercial real estate. The risks are, I think, pretty obvious. Office properties have really gotten hit hard from the pandemic and a slow return to work. Los Angeles, especially downtown, is seeing some excessive vacancies as a result of that trend. That's issue No. 1. Another issue which might not be as obvious: There is a considerable maturity schedule for commercial real estate that is upon us now. In the case of corporate credit, it is a few years, a couple years out.
But in terms of commercial real estate, tremendous maturities in 2023, 2024, '25, '26. It is not like it's ramping up, it's not like we have any sort of breathing room. It is upon us now, and the cost of borrowing, if you compare the maturing loans that are maturing in the next two-to-three years, those loans originated five years to 10 years ago.
Five years ago, if you think about the base rate environment, the cost of borrowing, and then you compare to today — the cost of borrowing is roughly doubled or more across the board.
And while there has been rental growth in certain real estate sub-asset classes, it has not been uniform and it has not been even across all of them. So there will be, and there already is, pain in office properties. But there may also be pain in non-office real estate, again, because not every multifamily building and not every logistics warehouse has had the ability to raise rents to the point where it could sustain a doubling of its interest expense. I would even go so far as to say to think about the most levered real estate asset classes or even just asset classes outside of real estate, the most levered in the last five years were the ones that were considered the highest quality. The higher the quality, the more leverage it would take on at an even lower rate. So multifamily at the time ... was considered highest quality and the rates were kept really, really low because banks and the various, government agencies wanted that kind of debt.
And now base rates are 500 basis points higher, the cost of borrowing is double. It went from 3% to 3.5% to 7%, 8% for these types of mortgages. I think you're going to see a situation where there are really good, quality assets and just have bad balance sheets. And that's going to be true in real estate, that's also true in corporate credit — certain businesses like healthcare, like software, were considered high growth or just critically required industries in the corporate credit space, so they were levered pretty high in 2019, and now the cost of leverage has gone up and it's a real problem. You are starting to see the opportunity set in good business, bad balance sheet investments. Our teams across the board at Oaktree are gearing up for this. I wouldn't say it's here just yet.
The depth of the investment opportunity under this theme is coming in the next couple of years. But the signs are showing themselves; look at maturity schedules, as you look at cost of borrowing, as you look at coverage ratios of interest expense under a rising rate environment, all of those factors are deteriorating. And the worst of that is yet to come, which means the depth of the investment opportunity is in front of us.