(Bloomberg) -- Banks are preparing for further losses as delinquencies in loans tied to office space continue to rise, according to the Federal Reserve.

The Fed said Friday that the rate of late payments on some commercial real estate loans had surged to above its pre-pandemic level. Officials at the central bank are focused on “improving the speed, force and agility of supervision, as appropriate,” the Fed said in a semiannual report.

US bank regulators, including the Fed, have been sounding alarms about the commercial real estate market. About a year ago, officials asked lenders to work with creditworthy borrowers that are facing stress in the sector. Property owners have come under pressure as borrowing costs have soared. 

Potential risks were spotlighted earlier this year by the troubles at New York Community Bancorp, fueled by concerns linked to a portfolio that included billions of dollars in apartment loans in New York’s rent-regulated complexes.

Read More: Powell Says US Banking System Can Withstand Threats From CRE

Despite the concerns, Fed Chair Jerome Powell and other officials have said the US banking system is strong enough to cope with the CRE risks. 

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