An official website of the United States government
Share This Page:
Collection: On Point
At the start of the pandemic, businesses embraced remote work and office buildings emptied-and remained largely empty through 2021 as new COVID-19 variants emerged. Since this occurred in most cities across the country, geographic differences have been less pronounced than in prior recessions. Instead, differences in office property stress in this cycle have been more evident across different submarket types, where submarkets with high office building density have fared the worst. Specifically, office properties located in urban business districts have had higher increases in vacancy rates, and deeper declines in asking rents, than office properties located in suburban submarkets. This difference in stress appears to have caused a similar divergence in large bank commercial real estate (CRE) loan credit quality. Loans made by large banks and secured by office properties located in urban business districts have a higher share of loan commitments rated classified than do loans secured by suburban office properties.
Mark Manning, Harini Parthasarathy