A downright scary snippet from Moody's (Frankies favorite) Let this sink in: Not long from now, almost one-quarter of all US office space
may be vacant. And if
work-from-home—the key culprit—persists, commercial-property values will be further decimated by up to $250 billion, Moody’s warns. When combined with the impact of lower rents and lease turnovers, the vicious post-pandemic cycle will reduce revenue for office landlords by as much as $10 billion. That in turn could translate into a quarter-trillion dollars of “property value destruction,” Moody’s officials said. The figures illustrate the gloomy prospects faced by property owners and lenders as employers continue to jettison square footage or shift from multiyear leases to shorter-term and more flexible co-working arrangements. A full 85% of North American organizations polled by brokerage Jones Lang LaSalle have implemented hybrid work, and occupancy across offices in major US cities is stuck at about 50% of pre-pandemic levels. Wavering demand and increased borrowing costs have
slammed office valuations, especially among older buildings. “The argument for maintaining or even increasing remote work practices remains compelling for many businesses,” Moody’s said. “If productivity remains stable and costs can be reduced by forgoing physical office spaces, the rationale for mandating in-office attendance diminishes.”
—David E. Rovella