In a recent white paper, the Mortgage Bankers Association examined two potential outcomes for the U.S. office market, based on whether current trends in hybrid work permanently stick — and people continue to go into the office less frequently. The second scenario imagines what could happen if a looser labor market means employees will be prompted to go into the office more often, seeking job security.
But already there's been an observable slowdown in originations for office property since pre-pandemic days as those questions linger. Commercial and multifamily mortgage loan originations were up 72% in the first quarter of 2022, compared to the same period in 2021, while those categories of originations were up 19% in Q2 2022 over Q2 2021.
The MBA's white paper used, as somewhat of a case study, the fallout on the U.S. office market following the 2001 dot-com bust, finding net operating incomes for office properties fell 12% between Q2 2000 and Q4 2004. The Federal Reserve Board of San Francisco in an October 2001 report found San Francisco's vacancy rate rose sharply very quickly, from 1.7% in Q1 2000 to 10.3% in Q2 2001.