Remote work risks wiping $800 billion from value of office buildings in major cities: Report

livemint.com:

real estate as people’s new habits influence where they shop and live. In a moderate scenario, the report said that the demand for office space will be 13 percent lower by the end of the decade. Attendance still is 30 percent lower than what it was before the pandemic and only 37 percent of people are back at the office every day, it said.

Foot traffic near stores in metropolitan areas remains 10 percent to 20 percent below pre-pandemic levels, McKinsey said. Lower office attendance has driven down asking rents in real terms. US cities have generally seen sharper drops, with San Francisco and New York City showing declines of 28 percent and 18 percent respectively, while European centers such as Paris, London and Munich have been more resilient.

The trend is set to continue with more employers downsizing space to reduce costs as soon as long-term leases come to an end. “Some tenants have chosen not to wait for their renewal dates and instead have bought their way out of long-term contracts," McKinsey said. Developers can adapt to the declining demand for office and retail space through the creation of hybrid buildings whose design and infrastructure could be modified to serve different uses, McKinsey says.