WITH OFFICES SITTING EMPTY, LANDLORDS ARE ‘HANDING BACK KEYS’

Office landlords, hit hard by the work-from-home revolution, are resorting to a desperate measure in the real estate world: “handing back the keys.”

When this happens, the landlord stops paying the mortgage on the office building or declines to refinance it. The bank or investors who made the loan then repossess the building.

Some of the biggest names in commercial real estate, like Brookfield and Blackstone, have defaulted on mortgages and have started or completed the process of handing back the keys on office towers. The tactic reveals both the depth of the problems in the office market and the ability of big property companies to push much of the financial pain onto others — in this case, banks and other lenders.

Since the pandemic began, office employees showed they could get their jobs done from home, and many have been reluctant to come back. And companies realized they could save a lot of money by renting less office space, making many office towers unprofitable for their owners and turning many business districts into ghost towns. About 23 percent of office space in the United States was vacant or available for sublet at the end of November, according to Avison Young, a real estate services firm, compared with 16 percent before the pandemic.

Handing back the keys is a drastic move, but it makes sense because it can limit a landlord’s losses on a building.

Take a property company that bought an office tower for $100 million just before the pandemic, investing $25 million of its own money and borrowing $75 million. If the building is hemorrhaging tenants