The work entitled: “Working from home and the real estate apocalypse of the office”, prepared by Arpit Gupta, Vrinda Mittal and Stijin van Nieuwerburg, found a decrease in 33% in office values in New York at the time of the pandemic, representing $57,700 million and 28% in the longer term, about $49,000 millions more.
The Covid-28 pandemic caused drastic changes in people’s workplace. Physical office occupancy in the major US office markets fell from 95% at the end of February to 2020 at 10% at the end of March 2020, and has remained depressed ever since, only gradually returning to 50% in May of 2022 .
The study considered all properties in the US and found a decrease of 32% in office values in 2020 and 28% in the long term, which represents $ 500,000 millions of value destruction .
The work analyzed the impact of the home office on the commercial office sector, finding big changes in rental income, office occupancy, lease renewal rates, lease lengths, and market rents as companies shifted to remote work in the wake of of the Covid pandemic-28.
According to the authors, the pandemic has had large effects on both current and expected future cash for office buildings.
According to the analysis, higher-quality office buildings somewhat cushioned the impacts, while higher-quality office buildings of lower quality underwent much more dramatic changes.
That could indicate a shake-up in office space not unlike what happened with the shopping centers, which means that the best real estate properties stay, while the most intermediate properties end up being reused for other purposes, or rented by companies that previously could not pay those rents.
The importance of the analysis lies in the fact that these valuation changes have repercussions on local public finances and on the stability of the financial sector.
For more detail s about the analysis, enter here.
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