My clients are scared shitless,” one longtime Wall Street real-estate investment banker told me the other day. I had called to check in on the prospects for commercial real estate in big cities, such as New York, San Francisco and Chicago, and to see if the long-rumored financial comeuppance in the sector was real, imagined or apocryphal. It turns out, it’s very real and it’s happening. But, like any serious financial disturbance, it’s not monolithic, or uniform.

It’s often been anecdotal and sui generis, with most of the pain being suffered in the so-called “Class B” office space in the big cities while the newer buildings in Manhattan are doing just fine, chock full with well-heeled tenants such as KKR and Dan Loeb’s Third Point Partners, at Hudson Yards, or TD Bank and The Carlyle Group, at One Vanderbilt, most of which signed long-term leases a few years back. Parts of what is also considered “commercial real estate,”—high-end resorts and logistics plays, including warehouses and data centers—are also doing just fine.

The real problem, my banking friend shared, is confined largely to the office sector of the market, with some ongoing concern also among retail tenants in big malls, strip