In New York City and big cities worldwide, commercial property owners are feeling the same pain: the rise in remote work has left their buildings empty.
A Persistent Pandemic Problem
During the pandemic, millions of workers and their employers learned that their jobs could be performed just as well, sometimes even better, from home. Employees loved the newfound flexibility and the hours they gained in their day from not commuting. Employers loved providing a coveted perk that didn't cost anything, and—even more than that—they loved not having to spend as much on expensive office leases.
Now with most offices having returned to work, many are allowing employees to work at least part of the week from home. As a result, some employers are opting to lease less space to accommodate a smaller in-person workforce. Others are choosing to move to nicer, newer spaces to attract top talent. This has left commercial real estate investors holding empty older buildings that are too old to offer the amenities employers want but too new to be torn down and redeveloped. The problem is especially pronounced for buildings that are not in prime locations.
A Bite Out of the Big Apple
A study conducted earlier this year by professors from Columbia University and New York University found that decreased demand for office space caused by the rise in remote work could lead to the value of office spaces nationwide dropping by 28%, or $456 billion – and about 10% of that value will be lost in New York City alone.
And it's not just a problem for investors. City governments in New York and elsewhere rely on property taxes to fund operations. If investors cannot lease out their properties, they're not likely to be able to pay the taxes the governments need.
With problems like this looming for private investors and government operations, bright minds representing public and private interests are coming up with inventive ideas.
Read the next installment of this two-part series to learn more.