The great work-from-home experiment enforced by the coronavirus
pandemic may cause significant pain to the office sector for years to
come.
Office vacancy across the nation could reach 19.4% by the end of
the year, according to Moody’s Analytics REIS, a commercial real
estate-focused subsidiary of Moody’s Analytics. That would be an
all-time high, surpassing the previous record from 1991 when vacancy hit
19.3% in the midst of the savings and loan crisis.
And New York is expected to be hit the hardest. In a paper released
this week, Moody’s Analytics predicted the severe economic hit could
lead to a 20% effective rent drop in New York City this year, the
biggest predicted drop of any city in the country.
“Despite the vast amount of support from fiscal and monetary
policy, if the severity of this economic downturn exceeds that of
2008-2009, then expect the office sector to suffer significantly,” the
report states.
Around the world, companies have been shown both the limits and
benefits of keeping workers in their homes. Proponents of the
traditional office say most employees are desperate to return to the
workplace.
Silverstein CEO Marty Burger said on a Bisnow webinar last month
that some businesses may even add office space to their portfolio in
order to create more space between employees. Still, several business
leaders have publicly questioned what kind of role the physical office
will play in the workplaces of tomorrow.
Berkshire Hathaway Chairman Warren Buffett said this week he thinks
the demand for office space may dramatically shift. His comments
followed Morgan Stanley CEO James Gorman’s proclamation the company
would edge away from real estate.
“Clearly, we’ve figured out how to operate with much less real
estate,” Gorman said on Bloomberg TV last month. “Can I see a future
where part of every week, certainly part of every month, for a lot our
employees will be at home? Absolutely.”
Barclays CEO Jes Staley said last week the bank will not return to its workplace setup from before the pandemic.
“There will be a long-term adjustment in how we think about our
location strategy … The notion of putting 7,000 people in a building may
be a thing of the past,” he told journalists after reporting the bank’s
first-quarter profits, per Reuters.
https://www.bisnow.com/new-york/news/office/moodys-analytics-predicts-record-office-vacancy-20-nyc-rent-drop-104276
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