This article reviews recent developments in U.S. office markets and describes demand-side and supply-side trends that have contributed to the recent weakness. It notes the role played by the changing fortunes of high-tech firms in a number of U.S. metro areas and how this situation has contributed to large increases in the volume of space available for sublease. Finally, the article focuses on the local construction and commercial real estate loan exposures of FDIC-insured banks and thrifts that have the task of managing their risks under changing market conditions.

Boston--Effective fraud risk management tools and appropriate levels of fidelity insurance may help reduce the possibility of fraud and minimize losses at insured institutions as the economy slows.

Chicago--The sluggish economy is pressuring insured institution asset quality while mid-year imbalances in the Region's manufacturing and commercial real estate sectors temper the economy's near-term growth prospects.

Kansas City--Recently, farmland values appear to be supported increasingly by government payments. The timing and amount of these payments are uncertain, making assessment of borrower creditworthiness and collateral protection difficult.

Memphis--A slowing economy is contributing to earnings erosion and adversely affecting consumer and construction credit quality among the Region's insured institutions.

New York--The Region's counties have not benefited equally from the economic expansion, and this has contributed to differences in performance and credit risk profiles among insured institutions.