Workers have gotten used to working remotely, and that is bad for cities in general and for commercial real estate in particular, The Washington Post reported.

The 52-story 555 California Street in San Francisco is about 93 percent leased, but many tenants, including banks and law firms, may not renew their leases as San Francisco, like many other cities, feel the post-pandemic impact of vacant offices.

The co-owners of 555 California, Vornado Realty Trust and the Trump Organization have requested more time to pay back the $1.2 billion loan used to purchase the building. They are not the only ones. Manus Clancy, senior managing director at real estate data provider Trepp, told the Post that office delinquencies spiked in May, signaling a “tipping point.”

Asked about commercial real estate concerns in a recent television appearance, Treasury Secretary Janet L. Yellen said she thinks that "there will be issues with respect to commercial real estate," and banks are “broadly preparing for some restructuring and difficulties going ahead.”

“If office and retail owners are having trouble generating rental income because people just aren’t going into the office and shopping, then it increases the odds that they aren’t going to be able to pay back those loans in timely way,” Mark Zandi, chief economist for Moody’s Analytics, told the Post. “That means losses will start to mount on those loans. And because the banking and financial system more broadly is already struggling with lots of other problems, … there’s going to be more banking failures.”

Office occupancy will never return to the levels experienced before 2020, experts said. In February, workplace data company Kastle Systems estimated that half of workers in the United States had returned, but the number has not increased since then.

Examples of companies’ real estate retrenchment abound, according to the Post.

Amazon has paused developing projects, such as its second headquarters, known as HQ2, and Google is not currently going forward with a proposed 80-acre campus in San Jose. Comcast, one of the biggest employers in Philadelphia, is moving out  of some office buildings there. Brookfield, a major office building landlord in Los Angeles, has defaulted on more than $1 billion of commercial real estate loans in recent months, according to Bloomberg. In Washington, D.C., office vacancy has increased to about 20 percent.

The worst can still be avoided, experts told the Post. Bankers can renegotiate the terms of their loans to landlords. “It’s in no one’s interest to have them all fall into foreclosure at once, because that could destabilize the banking system,” Brookings Institution fellow Tracy Hadden Loh told the Post. “So banks will take what they can get in terms of payment and work through this. Everyone is going to be doing everything in their power to prevent that from happening.”

But the effects on business districts are real. In San Francisco, business ranging from shoeshine stands to restaurants to major retail chains are suffering form the lack of foot traffic. That problem is exacerbated by the concentration of high tech companies in the city, which make working remotely easier.

"Prior to the pandemic, we had the lowest vacancy rate of any city in the country,” Robert Sammons, a researcher for commercial real estate brokerage Cushman & Wakefield, told the Post. “The market was incredibly tight across the board. But now the workplace has shifted, and it’s shifted more than likely permanently.”