Remote work could wipe out $800B from office building value by 2030
foxbusiness.comReventure Consulting and Reventure App CEO Nicholas Gerli says the housing market is in a «purgatorial» state on «Making Money.»
The shift to remote work in the wake of the COVID-19 pandemic could erase $800 billion in value from office buildings across major global cities by 2030, according to a new study published by McKinsey.
The survey examined real estate in nine «superstar» cities – San Francisco, New York, Houston, London, Paris, Munich, Tokyo, Beijing and Shanghai – and estimated that office attendance is currently about 30% lower than the typical pre-pandemic level seen in 2019.
Demand may stir back to life in coming years, but the consulting firm projected that attendance will still be about 13% lower in 2030 compared to before the pandemic began.
The massive decline in demand will ultimately drive down property value. On the average, the total value of office space in the nine cities could plummet by 26% from 2019 to 2030 – or a decline of roughly $800 billion.
COMMERCIAL REAL ESTATE CRASH STILL LOOMING OVER US ECONOMY
The Amazon HQ2 Met Park campus in Arlington, Va., on April 3, 2023. (Nathan Howard / Bloomberg via Getty Images / Getty Images)
«The decline in demand has prompted tenants – wary about current macroeconomic conditions, uncertain about how much their workers will come to the office, and therefore uncertain about how much space they will need – to negotiate shorter leases from owners,» the report said. «Shorter leases, in turn, may make it more difficult for owners to obtain financing.»
Property value could take an even bigger hit if interest rates continue to rise. The Federal Reserve has raised interest rates 10 times over the past year from near zero to around 5%. Policymakers have
Read more on foxbusiness.com
