How Will We Know When We Are At The Bottom of the Office Market?

I remember back when we had the savings & loan crisis. Back in the 1980’s between 30-50% of the nation’s savings & loans went out of business. Here in the East Bay around 25% of all our Class A office buildings went into foreclosure. I remember several instances where an investor purchased an office building in foreclosure at a fraction of the value just a few years prior, and then six months later lost the building in a second foreclosure when the value dropped significantly further. When will we know definitively when we are at the bottom of the office market? Older Class A office buildings selling in San Francisco for 75% less than their value just a few years prior? Are we at the bottom? No!  In my opinion, we still have a long way to go. There are a number of office leases still expiring, companies are still downsizing, employees are still significantly working from home in spite of employer mandates, and most lenders have shut their doors to office financing and refinancing unless the borrower pays down an existing mortgage to give the lender security. According to MISCI, U.S. commercial property loans set to mature in 2023 and 2024 total nearly $900 billion and$1.5 trillion by the end of 2025. When we see lenders begin to make reasonable office building loans without personal guarantees, the rights to your first born, and cross-collateralization against your family and vacation homes, then we may on the way back up from the bottom. Until then, fasten your seat belt, it might be a wild ride!