Work From Home and the Office Real Estate Apocalypse

83 Pages Posted: 9 Jun 2022 Last revised: 28 Nov 2022

See all articles by Arpit Gupta

Arpit Gupta

NYU Stern School of Business

Vrinda Mittal

Columbia Business School, Columbia University in the City of New York

Stijn Van Nieuwerburgh

Columbia University Graduate School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); ABFER

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Date Written: November 26, 2022

Abstract

We show remote work led to large drops in lease revenues, occupancy, lease renewal rates, and market rents in the commercial office sector. We revalue New York City office buildings taking into account both the cash flow and discount rate implications of these shocks, and find a 39% decline in long run value. For the U.S., we find a $413 billion value destruction. Higher quality buildings were buffered against these trends due to a flight to quality, while lower quality office is at risk of becoming a stranded asset. These valuation changes have repercussions for local public finances and financial stability.

Keywords: remote work, covid-19, office valuation, commercial real estate

JEL Classification: R3, R4, G12

Suggested Citation

Gupta, Arpit and Mittal, Vrinda and Van Nieuwerburgh, Stijn, Work From Home and the Office Real Estate Apocalypse (November 26, 2022). Available at SSRN: https://ssrn.com/abstract=4124698 or http://dx.doi.org/10.2139/ssrn.4124698

Arpit Gupta

NYU Stern School of Business ( email )

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Vrinda Mittal

Columbia Business School, Columbia University in the City of New York ( email )

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HOME PAGE: http://www.vrindamittal.com

Stijn Van Nieuwerburgh (Contact Author)

Columbia University Graduate School of Business ( email )

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