Working from home is killing office buildings’ worth.
As remote and hybrid work prove to be enduring trends, researchers are predicting grim fates for the future value of New York City’s commercial workplaces.
New York University and Columbia University researchers have updated a 2022 study to reflect new findings that offices will be even more impacted by remote work than they previously calculated.
“We now estimate a more persistent work-from-home regime, which has more of an impairment of office values even in the long run,” Arpit Gupta, co-author of the study, “Work From Home and the Office Real Estate Apocalypse,” told the Real Deal of the revised projection.
The revision comes as post-pandemic rates of workers returning to the office appear to have plateaued around 50%, much lower than many expected.
While last year, in its initial publication, the paper estimated that NYC’s office stock would lose 28% of its pre-pandemic value by 2029, an update this month has significantly upped that number to 44%.
The appraisal is not unique to New York: “The numbers for NYC are not an outlier; we find similar effects across many of the largest office markets,” the study warns.
Nationwide, they estimate this means a loss of $506.3 billion in value, a shift that has significant repercussions for local public finances.
Office stock will not feel the impact evenly, though, with higher quality buildings much more buffered than lower quality offices, which will bear the brunt of the devaluation.
The fallout is already visible, with an increasing number of landlords defaulting on loan payments, corporate tenants reconsidering long-term leases and the amount of vacant office space in the US surging, The Post previously reported.
In addition to commercial real estate, hybrid office schedules have also bled many businesses that relied on worker spending. In Manhattan alone, workers are estimated to be spending at least $12.4 billion less annually compared to what they were shelling out before the COVID-19 pandemic, according to calculations reported by Bloomberg in February.
“Less spending by workers in the central areas means a lot less sales tax revenue,” Jose Maria Barrero, a professor at Mexico’s Instituto Tecnologico Autonomo and a member of the WFH Research group, told the outlet at the time. “If you have fewer commuters, that means less revenue.”