The Washington Post reports that “Since the pandemic, employers — particularly in major cities — have been struggling to get their workers to return to the office, while others have given up and allowed workers to go fully remote.

“That trend is finally starting to catch up with the owners of office buildings in the form of rising vacancy rates and declining property values.”

Earlier this month, real estate data provider Trepp reported that an estimated $270 billion in commercial bank loans are coming due in 2023 — and warned of the potential for defaults. Office delinquencies spiked in May, signaling a “tipping point,” according to Manus Clancy, senior managing director at Trepp. Asked about commercial real estate concerns in a television appearance on Wednesday, [U.S.] Treasury Secretary Janet L. Yellen said she thinks banks are “broadly preparing for some restructuring and difficulties going ahead….”

“If office and retail owners are having trouble generating rental income because people just aren’t going into the office and shopping, then it increases the odds that they aren’t going to be able to pay back those loans in timely way,” said Mark Zandi, chief economist for Moody’s Analytics. “That means losses will start to mount on those loans. And because the banking and financial system more broadly is already struggling with lots of other problems … there’s going to be more banking failures.” Despite the public debate over return-to-office mandates at major companies, experts say office occupancy will never return to the levels experienced before 2020. In February, workplace data company Kastle Systems estimated that half of workers in the United States had returned, but that figure has stagnated since…

Still, many experts say the worst can still be avoided. The issues have been known for a while, giving lenders plenty of time to consider what to do. Banks can always renegotiate the terms of their loans to landlords… Although cities themselves could be in trouble because of property taxes and budget shortfalls, the financial system as a whole is more protected, said Brookings Institution fellow Tracy Hadden Loh, who researches real estate and cities. “It’s in no one’s interest to have them all fall into foreclosure at once, because that could destabilize the banking system,” she said. “So banks will take what they can get in terms of payment and work through this.”

Read more of this story at Slashdot.

Source: Slashdot – Working-from-Home May Start an Office Real Estate Crisis – But Banks May Adapt