As we know, hybrid work, sometimes at the office, sometimes at home, and completely working from home has reduced the need for office space. McKinsey Global Institute took a long, hard look at working from home and remote work and office space and determined that remote work — if it keeps up — is going to do away with $800 billion of the value of office buildings in major cities.
That’s a 26% drop from from 2019 and has the potential of seeing that value fall by 42% by 2030. Ouch.
“The impact on value could be even greater if rising interest rates compound it,” McKinsey said and the problem “could increase if troubled financial institutions decide to more quickly reduce the price of property they finance or own.”
Looking at a best-case scenario, demand for office space will fall by 13% by the end of this decade. That’s 30% lower than it was before COVID hit and with only 37% of workers back in their offices on a daily basis.
This drop also impacts foot traffic at retail stores in major cities. Foot traffic in those areas has fallen 10% to 20% below pre-pandemic levels.
Rents have also dropped. San Francisco rents are down 28%. In New York City that number is 18%.
Then you have employers that are downsizing space to save money. “Some tenants have chosen not to wait for their renewal dates and instead have bought their way out of long-term contracts,” McKinsey said.
Source link: Insurance Journal — https://bit.ly/3pTdzY8