Vacant offices are a huge economic risk.

There are still a lot of empty offices, which is becoming a big problem for the business.

The next significant threat to the U.S. economy could be hiding in the business towers of the country's downtown areas.

Companies are getting rid of so much office space because so many people still work from home, which could hurt the U.S. economy even more.

If the office sector falls apart, it would be harmful to the banks still owed about $1.2 trillion in office loan debt and to the many small businesses that depend on white-collar customers and the cities that get property taxes from office buildings.

It's a bad sign for the industrial real estate business when the U.S. economy already shows signs of stress and maybe even a recession.

Here are some ways that empty buildings in America could hurt the economy even more:

Foreclosures and failures by landlords

Nearly 20% of business space in the United States is empty right now. It's worse in San Francisco and downtown Los Angeles, where more than a fifth of offices are open.

Analysts say that if companies keep giving up their leases and demand for office space stays low, office landlords won't be able to get the rents they need to pay their mortgages and pay off business loans.

Many of these loans are coming due in the next year, and building owners will need to refinance their debts at a time when low usage has lowered the value of their buildings and interest rates have gone up.

This means that a lot of landlords could soon have to pay a lot more money.

Analysts say that things could go wrong.

Kenneth Rosen, head of the real estate research company Rosen Consulting Group, says that defaults and foreclosures will be the biggest effect.

The pain will also be felt by banks.

If there were more defaults and foreclosures, the U.S. banking system would shake.

Most of the $1.2 trillion in office space debt is due to smaller regional banks, which are already in trouble because depositors are leaving them for bigger banks.

Three smaller banks have failed in the last two months. Last week, shares of PacWest Bancorp fell because that trouble has continued to spread.

If office owners can't pay back their loans and have to give back the keys, banks will have to find new buyers, which is hard to do when interest rates are high, credit is tight, and worries about the economy are growing.

Policymakers are paying attention to all of this.

In a report that came out on Monday of last week, the Federal Reserve said that it is paying more attention to business real estate loans and the banks that usually give them out.

The effects could turn city centres upside down.

The ecology of downtown city centres is already being thrown off by rising vacancies.

Businesses that have always counted on a lot of foot traffic five days a week, like dry cleaners, shoe shine shops, restaurants, and convenience stores, need help to stay open.

James Wallace Sears, who owns a shoe repair shop in downtown Los Angeles, says, "Right now, I might get four or five customers a day." He also says that his monthly sales are down 85% from what they were before the COVID-19 pandemic. "I'm here starting up again to see if it still works, but I don't know.

Fewer people using public transport and the end of aid linked to the pandemic are creating budget deficits and huge projected shortfalls.

And for cities, having a lot of empty offices will mean less money from property taxes, which will hurt the city's budgets.

Landlords are looking for answers with all their might.

There are few good choices in the business real estate market.

Some landlords are looking into ways to turn their office buildings into apartments, which would help with the lack of housing. However, only some buildings can be turned into apartments with a lot of retrofitting and expensive reconstruction, which is a big job now that loans are harder to get and interest rates are higher.

Brokerage companies and landlords are doing everything they can to fill their high-end buildings with new tenants.

Cushman & Wakefield is giving helicopter tours of new offices in downtown Los Angeles. These offices were built on a very expensive bet that high-amenity spaces with trendy restaurants, high-end fitness centres, on-site child care, and airy workspaces would be enough to bring businesses and workers back.

So far, the demand for these higher-end spaces looks good, but investing in them now, when the economy is very uncertain, is a gamble that experts think will need to be more to save the office sector as a whole.

A better option is one that many workers want to avoid stopping remote work and going back to the office full-force.

If that doesn't happen, the cities and companies that used to do well because of white-collar workers could fail without them.