Tags: downtown | office space | pandemic | real estate | cities

Remote Work Guts Downtowns, Will Cost Cities $453 Billion

By    |   Tuesday, 06 December 2022 10:09 AM EST

More than half the downtown office space in U.S. cities remains unoccupied after the COVID-19 pandemic, Business Insider reported.

Although 95% of downtown offices were occupied before the pandemic, that number now is about 47% more than 2½ years after coronavirus prompted lockdowns and mask/vaccine mandates, Business Insider reported.

As for the value of office real estate, a study led by New York University professor Arpit Gupta characterized it as an "apocalypse" and estimated that $453 billion in real-estate value would be lost across U.S. cities, a decline in lease revenue of 17 percentage points from January 2020 to May 2022.

The result of unoccupied office space has been fewer people and public-transit use, and more shuttered businesses in downtown areas.

San Francisco has faced office-vacancy rates of 34% to 40% in some parts, while in New York about 50% of workers are back in the office.

Even in cities such as Austin, Texas, and Dallas, where more workers have returned, occupancy rates are still only 60% of pre-pandemic days.

Public-transportation ridership remains stuck at about 70% of pre-pandemic levels.

The National Bureau of Economic Research predicted that 30% of workdays would be worked from home by the end of this year, a large increase from before the pandemic.

The impact will hurt U.S. cities as reduced tax revenue and sales receipts for small businesses affect city budgets.

The value of commercial real estate in New York City declined by 45% in 2020, and research suggests it will remain 39% below pre-pandemic levels, Business Insider reported.

One San Francisco Mission District building, which sold for $397 million in 2019, is on the market for about $155 million — a 60% decline.

Declines in real-estate valuations lead to lower property taxes, which help pay for cities' services and jobs.

The National League of Cities' 2022 survey found that nearly a third of cities said they would be in a difficult financial situation in 2023 after federal funds dissipate. A recession would make things even worse.

"The fact of the matter is there will never be the good ol' days where everyone's downtown working," Seattle Mayor Bruce Harrell said recently, GeekWire reported.

"Life as we knew it before the pandemic is not going to go back," San Francisco Mayor London Breed told Bloomberg in October.

One solution to the decreasing amount of filled office space would be to convert commercial real estate into housing.

However, only 112 commercial office spaces in the U.S. have been converted since 2016, Business Insider reported. CBRE data shows that 85 such projects are underway or have been announced.

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More than half the downtown office space in U.S. cities remains unoccupied after the COVID-19 pandemic, Business Insider reported.
downtown, office space, pandemic, real estate, cities
Tuesday, 06 December 2022 10:09 AM
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