The office meltdown will result in $1 trillion of losses, real estate billionaire Barry Sternlicht has said

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The office meltdown will result in $1 trillion of losses, real estate billionaire Barry Sternlicht has said.According to Bloomberg, Sternlicht stated at the Global Alts conference in Miami Beach that the value of US office properties, once a $3 trillion market, has now declined to about $1.8 trillion. This drop in value has been attributed to the lasting impact of remote work, which has become a significant trend of the COVID-19 era.The billionaire described the current situation facing the office segment of the commercial property market as an "existential crisis" and criticized the Federal Reserve for creating a "serious mess" in both capital markets and the real estate market.In the fourth quarter of last year, the US office market experienced its fifth consecutive quarter of negative net absorption of office space. With 5 million square feet of new supply, the overall office vacancy rate reached a 30-year high of 18.6%, according to CBRE.The trends of remote work prompted by the pandemic continue, with no clear indication of a reversal. Additionally, concerns are mounting over a surge in commercial real estate debt, estimated at nearly $1.5 trillion for loans maturing in the next few years.The Fed's aggressive rate hikes since 2022 have created challenges for refinancing commercial mortgages, as property owners must seek new debt at higher rates, backed by offices that have seen their values decline.President Joe Biden's administration has encouraged developers to convert unwanted office buildings into apartments to alleviate the US housing shortage, although such redevelopment can be costly and may not be feasible for all buildings.Analysts at Capital Economics recently predicted that office buildings could experience a further 10% decline in prices, resulting in a total peak-to-trough loss of 20% for US office values.