Researchers from the NYU Stern School of Business and the Columbia University Graduate School of Business say the work-from-home movement will result in $500 billion of lost value in office real estate.
In a recent study, the researchers found a 32% decline in office values in 2020 and predict a 28% fall “in the longer-run.” The work-from-home shift since the pandemic has caused significant changes in lease revenues, office occupancy, lease renewal rates, lease durations, and market rents, researchers say.
Robust tools for working from home had been in place for years, but the necessities of the pandemic pushed widespread adoption of remote work. According to the researchers, office occupancy dropped from 95% in February 2020 to 10% within a month. By May 2022, it had only bounced back to 50%.
If the trend remains strong, a lot of office space might not be necessary. That would mean massive financial implications for land values and valuations in lending, nearby retail space, and tax resources for local governments.
The declines don’t fall evenly. There is “some evidence of a ‘flight to quality,’ particularly in rents,” researchers say. But rents may have yet to bottom out, as vacancy rates are at 30-year highs in many cities, and on average two-thirds of leases haven’t come up for renewals yet.
Related Stories
Office Buildings | Jan 9, 2020
NFL’s Packers and Microsoft add an innovation center to a fledgling business district
The goal is to nurture startups aligned with local industries.
Office Buildings | Jan 9, 2020
Foster + Partners to design Alibaba’s new offices in Shanghai
The firm won a design competition for the project.
Sponsored | HVAC | Jan 6, 2020
Four Ways Building Systems Create Long-term Profitability
When accounting for the total cost of ownership and the potential return on investment, owners and developers should consider total energy usage, the lifespan of building systems equipment, the recruitment and retention of occupants, and lease rates.
Office Buildings | Oct 28, 2019
LEGO opens the first phase of its new Billund, Denmark campus
C.F. Møller Architects designed the project.
Office Buildings | Oct 23, 2019
Ferrara Candy Company gets new HQ space in Chicago’s Old Post Office building
NELSON Worldwide designed the project.
Office Buildings | Oct 23, 2019
London’s new ‘Can of Ham’ office building completes construction
Foggo Associates designed the building.
Office Buildings | Oct 21, 2019
IH Mississippi Valley Credit Union headquarters completes construction
LEO A Daly designed the building.
Office Buildings | Oct 17, 2019
New social campus for innovators, tech leaders covers a full city block
Hollwich Kushner, with Gensler as design development architects, designed the building.
Office Buildings | Oct 15, 2019
New 80,000-sf coworking space completes in Chicago
It is the third ‘Spaces’ location in Chicago.
Office Buildings | Oct 8, 2019
David Chipperfield Architects to design new Rolex USA headquarters
The project will replace the existing building that has been occupied by Rolex since the 1970s.
