Remote work is cutting NYC office value by half: Study
The rise of remote and hybrid work is causing experts to predict a bleak future for commercial office space in New York City. A new study from New York University and Columbia University has updated previous projections and predicts that offices will be even more impacted by remote work than previously calculated. The study, titled “Work From Home and the Office Real Estate Apocalypse,” estimates that the persistent work-from-home regime will give rise to a long-term impairment of office values. The research shows that while last year’s projection estimated a 28% loss of NYC’s office pre-pandemic value by 2029, an update has shown that this number has significantly increased to 44%. This trend is not unique to New York, with many of the largest office markets all experiencing the same effects. The study also predicts a negative impact on public finances, with a nationwide value loss of $506.3 billion. The devaluation of office space will not affect everyone equally, with higher quality buildings being much more buffered than lower quality offices. The consequences are already apparent, with landlords defaulting on loan payments, corporate tenants reconsidering long-term leases and the amount of vacant office space in the US surging. The shift to remote work is also bleeding businesses that relied on worker spending, with workers estimated to be spending at least $12.4 billion less annually in Manhattan alone. The decline in worker spending has significant implications for sales tax revenue and local public finances.
FAQs:
Q: What is causing the decline in office real estate values in New York City?
A: The rise of remote and hybrid work is causing experts to predict a bleak future for commercial office space in New York City. The persistent work-from-home regime is giving rise to a long-term impairment of office values.
Q: What is the revised projection estimate for office stock loss in New York City compared to initial projections?
A: Last year’s projection estimated a 28% loss of NYC’s office pre-pandemic value by 2029, but an update has shown that this number has significantly increased to 44%.
Q: Will the decline in office real estate values affect everyone equally?
A: No, the devaluation of office space will not affect everyone equally, with higher quality buildings being much more buffered than lower quality offices.
Q: What are the consequences of the shift to remote work on public finances?
A: The study predicts a negative impact on public finances, with a nationwide value loss of $506.3 billion. The decline in worker spending has significant implications for sales tax revenue and local public finances.
Study finds that remote work is reducing the value of NYC offices by 50%
The rise of remote and hybrid work is having a detrimental effect on the value of office buildings, spell a grim future for commercial workplaces in New York City. Researchers from New York University and Columbia University have updated a 2022 study, estimating a more persistent work-from-home regime resulting in the impairment of office values in the long term. Co-author of the study, Arpit Gupta, explains that the revision comes as post-pandemic return-to-office rates are plateauing around 50%, much lower than anticipated, resulting in predictions that the city’s office stock could lose 44% of its pre-pandemic value by 2029. Nationwide, the study estimates this will mean a loss of $506.3 billion in value with significant repercussions for local public finances. Although higher quality buildings are expected to be buffered against the devaluation, landlords defaulting on loan payments, corporate tenants reconsidering long-term leases, and vacant office spaces across the US are already on the rise. Hybrid office schedules have also negatively impacted businesses that previously relied on worker spending. In Manhattan alone, workers are estimated to be spending at least $12.4 billion less annually compared to pre-COVID spending, significantly affecting sales tax revenue.