Evidence shows that downtown San Francisco’s office market has indeed become highly distressed since 2023, but lenders have not ended up owning “virtually all” or even a large share of the office towers.

• Severe distress, but not universal: San Francisco’s office vacancy rate climbed to around 36–37% in 2024, the highest of any major U.S. market, and office attendance remains far below pre‑COVID levels.(axios.com) CMBS/CRE loan data show that the San Francisco metro has the highest overall CRE distress rate among large U.S. markets (about 22.1% as of September 2024), with office loans the most troubled property type nationwide.(businesswire.com) This validates the “toxic debt / lots of distress” part of the thesis, but that is only half of the prediction.

• How distress has actually resolved: Instead of mass foreclosure with banks taking title, most troubled downtown office assets have been resolved through distressed sales or loan trades to other private owners:

  • The 22‑story tower at 350 California Street sold at roughly a 75% discount to its previous estimated value, to SKS Real Estate Partners and a partner—not to a bank or lender REO.(sfgate.com)
  • In 2024, 23 downtown office buildings changed hands for about $916 million; coverage by CBRE and local press notes that much of this activity involved distressed assets being bought by institutional and wealthy investors, at steep discounts.(sfchronicle.com) Again, these are transfers between private owners, not bank takeovers.
  • The vacant tower at 199 Fremont (300 Howard) was sold in 2025 for about $111 million to DivcoWest and Blackstone, far below pre‑pandemic valuations but still a private‑equity deal, not lender ownership.(sfchronicle.com)
  • At 353 Sacramento Street, New York Life and Lincoln Property bought the distressed loan at a major discount; reporting emphasizes that the building “was never foreclosed on,” illustrating how lenders prefer selling the note to becoming the property owner.(sfstandard.com)
  • Brokers are marketing large office loans such as those on 45 Fremont Street and Market Center (555–575 Market) on behalf of banks, highlighting that the strategy is to dispose of the debt or facilitate a recapitalization, not to foreclose and hold the real estate on bank balance sheets.(ipgsf.com)

• Banks are reducing exposure, not accumulating towers: Industry coverage describes big lenders (e.g., ING, JPMorgan, Goldman Sachs, Capital One) selling office‑backed loans at deep discounts to investors in order to cut their commercial office exposure.(reddit.com) That is the opposite of a scenario where “virtually all of downtown” ends up owned by banks.

• Scale of distress vs. “most towers owned by banks”: Even in the securitized‑loan universe, only about one‑fifth of San Francisco CRE loan balances are classified as distressed; that is substantial but still far from “most” of the downtown office stock.(businesswire.com) Meanwhile, marquee towers like Salesforce Tower, 555 California, 525 Market, and many others remain in the hands of REITs, pension funds, insurance companies, and other private owners—not banks or special servicers as long‑term owners.

• Timeframe: The prediction (made in early 2023) used language like “soon” and “over the next few years.” Nearly three years later, the pattern is clear: widespread distress and big value write‑downs, but lenders overwhelmingly try to avoid ending up as owners, instead pushing note sales, restructurings, or third‑party acquisitions. With transaction volumes rising and some early signs of leasing recovery, the window in which banks might still end up owning “virtually all” or even a large fraction of downtown towers is shrinking rather than expanding.(globest.com)

Because (a) serious distress did materialize but (b) banks/lenders do not own a large share of downtown San Francisco office towers, and many distressed assets have gone to other investors instead, the core ownership outcome described in the prediction has not come true as of late 2025.