Will Office Workers Return To The Office, Or Not…
Bisnow May 23, 2023 headlined a scary article” ‘Persistent’ Remote Work Could Slash Office Values By 44%” and cites a recent study by New York University and Columbia University. “In an update released this month, the authors now project an average value drop of 43.9% from 2019 to 2029. In just a three-year period between 2019 and 2022, office buildings nationally have lost roughly $506.3B in value, according to the researchers. office buildings lost $69.6B in New York, $32.7B in San Francisco had $5.1B for Charlotte.” Persistent work from home is the main culprit. 65% of companies require employees to go to the office at least some of the time. But overall firms are requiring significantly less office space and this trend may be with us for years to come. There are a number of resulting issues that result from this. It can be difficult if not impossible to refinance an office building that has been devalued so significantly. It may be harder to justify investing significant tenant improvement dollars for new tenancies if there is no equity left. Downtown districts have been decimated by the lack of customers for coffee, lunch, sundries, and other goods. Cities and Counties will face fiscal stress if their tax revenues are diminished through reassessment or appeal by office landlords to significantly reduce their property tax bills. Buildings with ow occupancy might not be properly maintained, repairs versus replacement to older HVAC and systems to save money, and in worst-case scenarios utilities and other services might be shut off for non-payment if there is negative cash flow.
