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Three Factors Prevent Me from Declaring We Are At Office Market Bottom

Feb 26, 2025 | Posted by Jeff Weil | Califorina Business, California Economics, Commercial Financing, Commercial Real Estate, Mortgage, National Economu, Office Space, Real Estate Landlords, San Franciisco, The Office Market, Trends, Trends for Office Tenants, U.S. Economics |

I have been writing and publishing the OfficeTimes Corporate Office Perspective for the past 45 years, and during this time I have made many industry predictions. Almost every one of them has come true, and this is documented if you want to check. It almost feels like we are at the office building bottom, but there are three large factors that I believe will cause the office space recovery to not occur for some time to come. First, there are hundreds of billions in office building loans coming due in 2025, and lenders are increasingly not kicking the can down the road but are instead filing notices of default. Right now, there are a large number of office buildings in the Bay Area headed to Trustee sales, and lenders are reluctant to loan on this type of product unless it is a high-quality, almost or fully-leased complex to long-term credit tenants. If there is any risk new loans may be difficult to obtain. One prior credit-tenant category is now a red-flag and that is government leases, which due to the current administration has made purchasing or lending on GSA-leased buildings extremely problematic. This segues into the second reason the office recovery will take time. In my opinion, GSA will get rid of 100 million square feet of office space, either by early lease termination, non-renewals, or disposing of current office properties. Just today it was reported that over one million square feet of office buildings in San Francisco may be put on the market. Just imagine the economic damage should these properties be sold at fire-sale prices, and as worse, if there are massive government layoffs increasing the office vacancy around the country. The third reason is, not substantiated but my opinion, that Artificial Intelligence is having a major impact on employment and that companies are able to do a lot more with a lot fewer employees. This will more than out-weigh the back-to-office mandates.  What do you think?

 

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Jeffrey Weil, CCIM, MCR.h, SIOR

Executive Vice President
San Francisco Bay Area
1850 Mt. Diablo Blvd., Suite 200
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CA Lic. 00786195
Phone: +1 925 279 5590
License #: CA-00786195
Email: jeff.weil@colliers.com

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Contact Information:

  • Jeffrey Weil
  • Colliers International
  • 1850 Mt. Diablo Blvd., Suite 200
  • +1 (925) 279 5590
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Contact Information

  • Jeffrey Weil
  • Colliers International
  • 1850 Mount Diablo Blvd., suite 200
  • CA Lic. 00786195
  • +1 (925) 279 5590
  • jeff.weil@colliers.com
  • www.officetimes.com

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