Financial stocks sell off after comments from Wells’ CFO and head of real estate at Pimco A Wells Fargo & Co. executive said Tuesday the bank is seeing loan stress in older office buildings as the financial world grapples with lower real-estate values for working space as employees continue working from home.

“Older office buildings that are not renovated in certain areas of different cities, you know, are the places that you’re seeing the most stress,” said Michael Santomassimo, chief financial officer of Wells Fargo WFC, -1.50%, at the Morgan Stanley U.S. Financials, Payments and CRE Conference.

The office-space market is broken up into several subsectors, many of which are doing well, he said.

Smaller, owner-occupied buildings are holding up, and newer areas such as Hudson Yards in New York City continue to thrive, he said.

“Where the issues are, really the institutional office space and, you know, it’s a wide range of outcomes now,” he said. “You go to Times Square in New York City, not doing as well.”

Financial stocks were the third-weakest out of 10 subsectors of the S&P 500 SPX on Tuesday, as the broad stock market dropped.

Meanwhile, John Murray, managing director and portfolio manager who heads the global private commercial real-estate team at Pimco, said in an interview with Bloomberg that he sees more U.S. regional-bank failures ahead as workers stay home and demand for office space remains slack.

Lending institutions face about $441 billion in property loan maturities this year, he said.

“As stressed loans grow due to maturities … we expect that banks will start selling these more challenged loans to reduce their troubled loan exposures,” Murray said.

Higher-for-longer interest rates are also challenging borrowers with increased costs of loans. This in turn is impacting demand for fresh loans.