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Remote work is the visible enemy of office landlords

The pandemic-fueled increase in remote work is a visible enemy of office landlords. Companies embracing remote work are turning away from office space, leaving landlords dealing with high vacancy rates and forcing them to carve out concessions to attract tenants.

Real Estate and Rising Interest Rates

Rising interest rates are an issue too, though. As rates increase, property values tend to go down. Green Street estimated that office building values have already dropped 8 percent this year.

More problems could be on the way as recession alarms blare, including companies cutting costs by way of layoffs, and reducing the need for office space. Office occupancy fell in each of the last three recessions, according to Moody’s Analytics.

As office landlords grapple with the short-term ramifications of a potential recession, the long-range isn’t looking good either. An analysis from a team at NYU projected that by 2029, New York City’s office stock will fall in value by 28 percent, or $49 billion.

When extrapolated to the national office market, the analysis estimated roughly half a trillion dollars of value couple be wiped out across the sector.

Source: Wall Street Journal

Updated: Boston Real Estate Blog 2022

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