Pimco, Brookfield Office Defaults Signal Deepening Property Pain

A Pacific Investment Management Co. office landlord that defaulted on $1.7 billion of mortgage notes sent shockwaves through a troubled part of the real estate market.

For years, property owners have been grappling with the rise of remote work — a problem so large that one brokerage estimates roughly 330 million square feet (31 million square meters) of office space will become vacant by the end of the decade as a result. But low interest rates allowed the investors to muddle along more easily without worrying about the debt.

Now, many office landlords are seeing borrowing costs skyrocket, leading owners such as Pimco’s ...