San Francisco has been leading the drop in prices for office buildings nationally for cities with high vacancy rates, even as sagging rents are expected to weigh on the property market for years to come, according to Fitch Ratings.
Office buildings in San Francisco commanded top sales prices of about $1,056 per square foot in 2020, but in the wake of the pandemic prices have tumbled to about $595 per square foot in 2023, according to Fitch Ratings. That implies all price gains in the city since 2017 have evaporated. The team also pinpointed some $10.5 billion of commercial real-estate loans in bond deals coming due through 2024, some likely to face refinancing challenges. Che’s team estimated that only 50%-60% of office loans maturing by the end of this year look likely to be able to refinance, in part because their 4.8% weighted average coupon is well below the roughly 7% prevailing market rate.