Signs of distress at retailers Big Lots Inc., Express and the Children’s Place could spell more trouble for the reeling commercial-real-estate market, according to Barclays Research.

Corporate bankruptcies have been rising since a pandemic lull, with filings in January touching the highest level since 2020, according to Epiq, a bankruptcy-services company, and Barclays.

In February, discount retailer Big Lots Inc.

reportedly began looking for financing after years of losses and waning liquidity, according to Bloomberg News. Kids’ apparel company Children’s Place Inc.

also began exploring new financing, while fashion retailer Express Inc.

has been looking to restructure its debt and potentially file for bankruptcy, according to the Wall Street Journal.

While corporate bankruptcy filings remain low from a historical perspective, the uptick comes as the buffer of low pandemic interest rates evaporates, along with government stimulus payments.

January saw the most bankruptcy filings by corporations since 2020, signaling a growing threat to commercial real estate.

Bankruptcy filings can be painful for the commercial-real-estate industry, since tenants can reject their leases in bankruptcy court, a process office-sharing company WeWork has been pursuing since its November filing.

See: WeWork files for bankruptcy, capping a stunning downfall

“The Children’s Place tenant tends to occupy smaller stores and has already significantly curtailed its physical stores, limiting the future impact of a bankruptcy filing,” according to the research team at Barclays led by Lea Overby.

However, Big Lots, with its estimated 1,400 stores, and Express pose more of a risk to investors in commercial-mortgage bonds, the Barclays team wrote in a Wednesday client note. Express has more than 600 stores, including its menswear Bonobos locations.

Big Lots, Children’s Place and Express didn’t immediately respond to requests for comment.

Commercial-real-estate values have already fallen 21% from their pandemic peak, while a growing wall of maturing debt is bearing down on borrowers and lenders against a backdrop of higher rates. Write-offs on soured loans look to be a growing risk for regional and community banks.

Read: Regional-bank stocks are back under pressure as investors get ‘a dose of reality’ about obstacles to cutting rates

Big Lots shares were up about 3.3% on Wednesday, while shares of Children’s Place were roughly 28% higher and shares of Express were up about 7.1%, according to FactSet. Shares of all three are down between 37% and 75% on the year.

See: Big Lots’ stock tumbles as Wall Street’s top bear sees more than 80% downside

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