(WATCH) Commercial Crash

Since Covid, millions of Americans have gotten used to working from home. Now, major cities are feeling the long-term effects of half-empty offices. Nowhere is the problem more acute than in the nation’s capital. Here’s Lisa Fletcher.

The following is a transcript of a report from “Full Measure with Sharyl Attkisson.”
Watch the video by clicking the link at the end of the page.

This is K Street in the nation’s capital. Just blocks from the White House and major federal agencies, it’s traditionally home to high-spending lawyers and lobbyists, and they keep the hotels, restaurants, and other businesses thriving in the center of DC.

But that’s all changed these days; everywhere you look, there’s space available, and to find out why, we’re taking a walk with Greg Hull, a commercial real estate executive with the company Rappaport.

Greg Hull: There’s a lot of vacancy today, and what ends up happening is the retailers below suffer and the problem is really that these retailers depend on the tenant above them.

Lisa: I mean, look at all the ones we are walking by, Greg, they’re all empty,

Hull: Right, because people are working from home either Monday, Wednesday, Friday or Tuesday, Thursday. Very, very few people are coming in five days a week.

Across the nation, the signs of a commercial real estate crisis are everywhere. Earlier this year, the developer of this 93-story New York building defaulted on a $240m loan.

In Los Angeles, this tower, valued at $632 million in 2019, is now worth just $215.

And in DC, after Donald Trump sold his hotel for $375 million, the new owner defaulted on the loan this year. At the mid-year point, office occupancy here in Washington, DC, stood at 77%. Nationally, office occupancy is around 80%.

The shortage of tenants makes it much harder for companies that own buildings to pay their bank loans, and that heightens the risk they’ll default or stop making payments altogether.

And it’s worth remembering it was a string of people defaulting on their property payments that triggered a rash of bank failures in 2007 and 2008, which sent the economy into the Great Recession.

Bankers, builders, and realtors like Carl Becker hope that’s not what happens this time.

Becker has 25 years of experience in Washington; on this day, he’s trying to line up new tenants or a buyer of a mixed-use building north of downtown.

Carl Becker: We’ve seen a dramatic increase in the amount of properties that have been foreclosed upon or the keys turned back, and there’s more of those in the pipeline. I think 2026 is going to be the peak of when those properties face their uncertain future.

Lisa: Compare for me what it would’ve been like for you to move this property in 2019 compared to now post-pandemic 2024.

Becker: The climate in DC has changed dramatically since 2019, we’re still waiting for the return to work movement to materialize.

One of DC’s special challenges – a looming election where one of the candidates has repeatedly said he wants to cut the size of government and shrink the workforce.

President Trump: And one other thing I’ll be doing early in the administration is closing up the Department of Education in Washington, DC.

A popular idea among some of the electorate, but in a place where more than 20% of workers are federal employees, it could further empty the city’s buildings.

Lisa: President Trump is talking about shrinking government and getting rid of departments. What impact does that have on a place like DC?

Hull: The numbers are one out of three buildings are either owned or leased by the federal government, and so again, you have buildings, multiple buildings that the federal government is supposed to be occupying. They may occupy them, and they may pay rent, but there’s nobody there.

Lisa: And what does that mean for the economy?

Hull: I’ll tell you, for the retailers, they can’t survive. The retailers depend upon the people upstairs, and if there are no people, they can’t pay their rent, and they can’t survive.

Meaning multi-story economic problems in cities across the nation.

For Full Measure, I’m Lisa Fletcher in Washington.

Watch video here.