Washington, D.C., is officially the nation's capital of office woe.

Nearly three-quarters of office loans in the D.C. area are at risk of default, according to Trepp. Its 72% share of office loans in the third quarter defined as "criticized" — a reflection of buildings with high vacancy, lease expirations or other risk factors — is now the highest of any major city in the country, overtaking San Francisco, which had a 71% criticized rate.

The numbers are according to the data provider's third-quarter CRE loan distress report, first reported by Bloomberg.

“Washington, D.C., could be the new ground zero for office distress,” Trepp Research Director Stephen Buschbom told Bloomberg.

The proportion of loans defined as criticized has nearly doubled in less than a year. It sat at 38.4% at the end of 2022.

The figure not only reflects the impacts of the pandemic but also long-term weaknesses in the region's office market. In 2019, 12.1% of office loans were criticized in the D.C. area. That figure was 1% in San Francisco and 6.1% in New York City.

Trepp pointed to a “high concentration of government office buildings” in a region where return-to-office numbers for the federal government and the General Services Administration “has been bleak.”

Distress has already emerged in the region. Landlords like Republic Properties, Brookfield, Hines and Monday Properties have defaulted on loans or handed over keys to their lenders.

The only other metropolitan area with more than half of its office loans in trouble is Seattle.