300. That’s more or less the number of regional banks at risk of collapse next year because of distress in the commercial real estate market, according to a working paper published by the National Bureau of Economic Research.

If you remember from the Silicon Valley Bank situation earlier this year, regional banks do a lot of lending to local office markets. I hear what you’re saying: Haven’t we been waiting for that commercial real estate shoe to drop since, like, half of us stopped going into the office? Isn’t this just like all those economists who cried recession? 

Well, yes and no.

I visited Steve MacDonald’s suite of offices back in 2021. He runs a law firm out of the Flood Building, a century-old office tower in San Francisco.

Back then, he tried to sell me an Office Depot desk for pennies on the dollar. Nobody ever came in to use it. So today, I asked him if the desk was still there and if he’s still looking to sell it.

“You know, I don’t think it’s marketable. It’s a giveaway, because you got to pay people to take it away,” he told me.

MacDonald says the building isn’t much livelier than it was two years ago.

“It’s not better,” he said. “I’m a busy guy and I have my friends and co-workers so I don’t feel lonely to see it ghost-like, but I would have to guess it’s more ghost-like.”

This year, those ghosts have been haunting office building owners and the banks who lend to them.

“I would say we’ve dropped 20%, maybe as high as 30%. So that’s a 20 to 30% reduction in aggregate space demand compared to where we were in 2019,” said Stephen Buschbom with the commercial real estate data company Trepp. 

He says the delinquency rate on office loans tripled over the course of the year.

“We thought commercial real estate could be really, really bad for small and midsize banks,” he said. “But remember that’s not the entirety of their portfolio.”

Regional banks also loan to retail and industrial properties, which are doing just fine.

On the glass half empty side, Tomasz Piskorski at Columbia Business School isn’t so confident about regional banks’ balance sheets.

“The banks already — because of high interest rates — they’re kind of in a dicey situation even without real estate distress, and commercial real estate distress just makes things worse,” he said.

For his part, Steve MacDonald in San Francisco is very close to moving his firm into a new building, where he’ll be renting less square footage.

If you need a last minute Christmas gift, that desk is still available.