Work From Home and the Office Real Estate Apocalypse

72 Pages Posted: 9 Jun 2022 Last revised: 5 Dec 2023

See all articles by Arpit Gupta

Arpit Gupta

NYU Stern School of Business

Vrinda Mittal

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

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: December 2, 2023

Abstract

We show remote work led to large drops in lease revenues, occupancy, 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 49% decline in long run value. For all U.S. office markets combined, we find a $664.1 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, office valuation, commercial real estate, urban doom loop

JEL Classification: R3, R4, G12, R51

Suggested Citation

Gupta, Arpit and Mittal, Vrinda and Van Nieuwerburgh, Stijn, Work From Home and the Office Real Estate Apocalypse (December 2, 2023). 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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New York, NY
United States

HOME PAGE: http://arpitgupta.info

Vrinda Mittal

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )

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United States

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

Stijn Van Nieuwerburgh (Contact Author)

Columbia University Graduate School of Business ( email )

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HOME PAGE: http://https://www0.gsb.columbia.edu/faculty/svannieuwerburgh/

National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

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ABFER ( email )

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