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A top real estate industry trade group got to take a victory lap last week as federal banking regulators announced some rule changes around how banks will be required to deal with a wave of office loans that are maturing just as future demand for office space looks shaky.

The FDIC, Office of the Comptroller of the Currency, the National Credit Union Administration and the Federal Reserve issued a joint guidance statement Thursday that says banks and credit unions can – and should, if a borrower’s financial condition can justify it – find short-term ways to modify troubled commercial real estate loans.

The new document will get layered on top of a 2009 guidance document that promises regulators won’t criticize financial institutions for modifying troubled commercial real estate loans after doing a “comprehensive review” of a borrower’s financial condition even if the loans are later classified as impaired. The 2009 guidance also says loans won’t be classified as impaired just because the value of the building they’re tied to drops below the outstanding loan balance, just so long as the borrower is still able to pay their debts according to “reasonable terms.”

The new piece in Thursday’s document: “Timely” short-term modifications to CRE loans are encouraged to help a borrower through a period of financial stress, but before a loan reaches the workout stage.

“These actions can mitigate long-term adverse effects on borrowers by allowing them to address the issues affecting repayment ability and are often in the best interest of financial institutions and their borrowers,” the banking regulators’ new guidance says.

Several trade groups welcomed the announcement, first among them the Real Estate Roundtable. That national commercial real estate trade group, whose board is chaired by Boston construction magnate John Fish of Suffolk Construction, had been lobbying regulators to give banks flexibility in handling troubled office loans as worries mount that the value of downtown office real estate could fall amid what appears to be a stalling of “return to office” momentum. Commercial real estate debt research firm Trepp had graded Greater Boston office loans as being among the nation’s riskiest in this environment.

“We enthusiastically welcome and applaud the action of federal regulators to accommodate commercial real estate borrowers and lenders as the industry endures a time of historic, post-pandemic transition,” Roundtable President and CEO Jeffrey DeBoer said in a statement. “Maturing office loans in particular face a new environment of higher operating and financing costs, much tighter bank lending requirements, and uncertainty in business space needs. This major step forward by federal regulators provides the flexibility The Roundtable has encouraged, and the relief many in the industry need, as the economy and communities struggle to move beyond the repercussions of the global pandemic.”

The lull in companies’ return to the office had pushed the total vacant square footage in downtown Boston up to 6.52 million square feet of direct vacancies and another 2.46 million square feet of sublease space for an overall vacancy rate of 13.2 percent across downtown and the Fenway in the first quarter of 2023, according to Cushman & Wakefield research.  

Much of the pain appears to be concentrated in class B properties, according to JLL data presented at a NAIOP Massachusetts forum last month. And a survey of local companies conducted by the Massachusetts Business Roundtable showed 47 percent of employers plan some sort of cutback in their real estate footprint. 

City officials are actively considering further incentives for converting downtown office properties to residential uses.