According to management consulting firm McKinsey & Company, US businesses are suffering the effects of hybrid- and remote-work policies, which has led to a 20% to 40% reduction in office space use.
The switch to primarily remote work at the start of the COVID pandemic in March 2020 left office spaces empty. Since then, commercial areas have seen a slow, but steady, return to the office. In March, the average office occupancy hit 50% of pre-pandemic levels.
Now that companies are rethinking the meaning of the office, that´s enough to offset sizeable drops in the value of office space. Nearly 30% of downtown office space is vacant, according to CBRE.
In San Francisco, for example, an office building worth $300 million before the pandemic could now be worth just $60 million. That´s an 80% loss in value!
According to a study by the National Bureau of Economic Research, New York City saw a 39% decline in office values in the past two years. This represents a $453 billion loss in overall office real estate value.
Even in smaller, less-dense commercial areas, the problem persists. With the shift to hybrid and remote work expected to stay, the future of the traditional downtown office remains uncertain.