There's some ugly reality settling in for the office real estate market, if researchers from the NYU Stern School of Business and the Columbia University Graduate School of Business are correct.
In their recent paper, Work From Home and the Office Real Estate Apocalypse, Arpit Gupta, Vrinda Mittal, and Stijn Van Nieuwerburgh argue that the work-from-home shift since the pandemic has caused significant changes in "lease revenues, office occupancy, lease renewal rates, lease durations, and market rents."
"We find a 32% decline in office values in 2020 and 28% in the longer-run, the latter representing a $500 billion value destruction," they wrote. "Higher quality office buildings were somewhat buffered against these trends due to a flight to quality, while lower quality office buildings see much more dramatic swings. These valuation changes have repercussions for local public finances and financial sector stability."
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