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
| Aug 30, 2013
State Government Report [2013 Giants 300 Report]
Stantec, Jacobs, PCL Construction among nation's top state government design and construction firms, according to BD+C's 2013 Giants 300 Report.
| Aug 28, 2013
Federal Government Report [2013 Giants 300 Report]
Building Design+Construction's rankings of the nation's largest federal government design and construction firms, as reported in the 2013 Giants 300 Report.
| Aug 26, 2013
What you missed last week: Architecture billings up again; record year for hotel renovations; nation's most expensive real estate markets
BD+C's roundup of the top construction market news for the week of August 18 includes the latest architecture billings index from AIA and a BOMA study on the nation's most and least expensive commercial real estate markets.
| Aug 23, 2013
5 most (and least) expensive commercial real estate markets
With an average cost per square foot of $16.11, Stamford, Conn., is the most costly U.S. market for commercial real estate, according to a new study by the Building Owners and Managers Association International. New York and San Francisco are also among the nation's priciest markets.
| Aug 22, 2013
Energy-efficient glazing technology [AIA Course]
This course discuses the latest technological advances in glazing, which make possible ever more efficient enclosures with ever greater glazed area.
| Aug 22, 2013
6 visionary strategies for local government projects
Civic projects in Boston, Las Vegas, Austin, and suburban Atlanta show that a ‘big vision’ can also be a spur to neighborhood revitalization. Here are six visionary strategies for local government projects.
| Aug 22, 2013
Warehouse remake: Conversion project turns derelict freight terminal into modern office space [slideshow]
The goal of the Freight development is to attract businesses to an abandoned industrial zone north of downtown Denver.
| Aug 20, 2013
Code amendment in Dallas would limit building exterior reflectivity
The Dallas City Council is expected to vote soon on a proposed code amendment that would limit a building’s exterior reflectivity of “visible light” to 15%.
| Aug 16, 2013
Today's workplace design: Is there room for the introvert?
Increasingly, roaming social networks are praised and hierarchical organizations disparaged, as workplaces mimic the freewheeling vibe of the Internet. Research by Susan Cain indicates that the "openness" pendulum may have swung too far.
| Aug 14, 2013
Green Building Report [2013 Giants 300 Report]
Building Design+Construction's rankings of the nation's largest green design and construction firms.
