The combination of the remote-work revolution and rising interest rates “could be worse than anything corporate landlords have experienced before,” The New York Times said in a 26 April analysis.

“Major banks and real estate analysts…warn that languishing properties, along with falling property values and higher borrowing costs, could increase the chances of a recession nationally and a budget crisis for the city,” the NYT wrote.

The city’s office occupancy rate has hovered on either side of 50 percent for months, indicating that it is unlikely to change significantly without a major unpredictable event.

New York City’s commercial real estate market is the largest in the U.S. The value of its office blocks could shrink by as much as $48.75 billion in coming years, according to a study by Columbia and New York universities.

JPMorgan Chase, Wells Fargo, and other major banks have been sharpening their warnings that $1.5 trillion in commercial real estate loans are coming due before 2026 and that, because of higher interest rates and lower occupancy, the risk is growing that large numbers of property owners might be unable to repay their loans.

More than two-thirds of loans on commercial real estate are held by small and regional banks, the NYT noted.

If the city’s market is hit by a wave of defaults on eight- or nine-figure loans against the city’s office towers, the banking industry could spin toward collapse, analysts told the NYT.

SL Green Realty, the city’s largest office owner, has seen its share price dive 76 percent since the COVID War began. Vornado Realty Trust’s stock is trading at its lowest prices since 1996. Shares of Empire State Realty, which owns the Empire State Building, are trading near record lows.

Green reported first-quarter earnings about 28 percent below the same period in 2020.

Collectively, the three office landlords have lost $17 billion in equity market value in the last 36 months.  

Blackstone, the private equity group that is the world’s largest owner of commercial property, reported distributions to shareholders were down by 36 percent in this year’s first quarter compared to a year earlier.

Blackstone already walked away from one Manhattan office building, has “greatly reduced” its commercial property holdings, according to the NYT, and has warned that the office property market’s future looks grim.

About 80 percent of new office leases signed so far this year were in so-called “Class A” buildings, usually the newest and most well-appointed.

Owners of older buildings hoping to convert them to apartments or condos have found that offices require extensive renovations to meet residential building requirements and that today’s higher interest rates make the conversions unaffordable.

The city is already reeling from the loss of roughly half of the million pre-COVID commuters that flooded its shops and restaurants. 

Also, New York’s office workers make about 75 percent more in annual pay than other categories of workers there, according to New York’s Office of the State Comptroller.

Because roughly half that spending on a daily basis has been lost, much of the economic ecosystem of bars, restaurants, hair salons, clothing stores, and other businesses that commuters supported already has disappeared.

TRENDPOST: Unless they were Trends Journal readers, office landlords were unwilling or unable to foresee that remote work would deflate their property values, even if it was less sweeping than it has become.

As a result, many landlords now face the prospect of selling at a loss, losing their properties to foreclosure, or filing bankruptcy.

As an alternative, some property owners have handed their keys back to their lenders and walked away.

Lenders then will be forced to put the failed properties up for sale. When they do, they will find that many buildings are too expensive for potential buyers to renovate. As a result, the properties will be sold as building lots at rock-bottom prices.

As we have often noted, cities are at the bottom of this pile of financial wreckage. 

Municipalities will lose a significant share of their property tax base, which makes up at least 40 percent, and often the majority, of cities’ revenues.

Ultimately, cities may reclaim some of these buildings for back taxes and foot the exorbitant bill for reconditioning them as low-income housing or shelters for homeless persons.


In 2019, the office building at 350 California Street in the heart of San Francisco’s financial district was worth about $300 million, according to property brokers.

The building is now on the market. Bids are expected to be around $60 million, 80 percent below the tower’s value just four years ago.

The plunge is emblematic of what the San Francisco Standard newspaper has called an “epic value collapse” of the city’s office building market.

However, no other city has seen values fall as much as San Francisco has, according to real estate services firm CBRE. Tech giants such as Dropbox, Meta Platforms, Salesforce, and Yelp have dumped hundreds of thousands of redundant space onto the market to sublet.

About 30 percent of the city’s office space is now empty, compared to roughly 4 percent in 2019, CBRE reported, more than a sevenfold increase.

Lease rates stood at an average of $75.25 during the first quarter; they had averaged $88.20 in 2020’s first three months.

Some subleases are being signed for $25 a square foot, a breakeven figure to do nothing more than keep the lights and heat on, according to Newmark Group, a real estate services firm. 

The vacancies, which drive down property values, pose a follow-on crisis for the city’s government: office landlords are among the city’s chief property taxpayers.

Coupling office real estate’s loss of value to a similar loss in retail space that emptied as commuters and residents fled to work remotely, the city stands to lose $1 billion in property tax revenue through 2028, according to the San Francisco controller’s office.

TREND FORECAST: Again, we had made the office building crisis forecast when politicians launched the COVID War in 2020 and forced people to work from home… which we had also forecast would be a trend. The value of office buildings is sliding everywhere in the U.S., as we have long documented in articles such as “As Forecast: ‘Dimming Hope’ That Pre-COVID Demand for Office Space Will Return” (22 Nov 2022) and “As Forecast: Office Building Bust Begins to Bite” (20 Dec 2022), among many others.

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