Work From Home and the Office Real Estate Apocalypse
83 Pages Posted: 9 Jun 2022 Last revised: 27 Nov 2022
Date Written: November 26, 2022
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: Suggested Citation