A study by the National Bureau of Economic Research (Opens in a new tab) (NBER) A study of the effects of the Covid-19 pandemic on our work environments predicted what it calls the “end of the world for office real estate.”
The September 2022 paper found a significant 45% decline in office values during 2020, with a long-term decline of 39%. The National Bureau of Economic Research puts the long-term figure at $453 billion, but among the findings was a hint about how offices could protect themselves from impending doom.
The abstract says: “High-quality office buildings have been somewhat isolated against these trends due to the trend towards quality, while lower-quality office buildings are experiencing more dramatic fluctuations.”
Should I rent an office?
However, an article on the San Francisco standard (Opens in a new tab) authorized”Converting downtown offices into housing isn’t the solution you think it is“It indicates that changing the purpose of older office buildings may not be a lifesaver after all. Not only is the building’s suitability for residential development a sticking point, renovation costs remain high as the cost of living crisis continues.
With the outbreak of the pandemic, an estimated 95% of physical offices were occupied, a number that had fallen to only 10% in March 2020. While many companies are now warning their employees to return to their positions, as of September 2022, the figure had just crept into the Almost half of what it was before the pandemic, at 47%.
Research indicates that higher-quality offices, with more facilities, perform best, with rents continuing or increasing. Meanwhile, less well-equipped office spaces face more difficult challenges and face the prospect of being repurposed.
However, the future remains uncertain. Nearly two out of three (62%) of US office leases have not renewed since the pandemic, and NBER researchers believe that “rents may not have bottomed yet.”
There have been mixed reactions to hybrid work procedures around the world, but in the face of challenging rental conditions, working from home may be on the cusp of another boom.