Office buildings won’t bounce back from pandemic-related value reductions for nearly two decades, according to a new analysis reviewed by Bloomberg.
Research from Capital Economics released Thursday found that office values won’t get back to pre-pandemic levels until about 2040, citing the move of people away from city centers and remote work.
“The reduction in office demand due to remote work will cause a hit to net operating incomes on a par with, or worse than, that experienced by malls over the last six years,” the report’s authors said.
“And in line with the experience of malls, the structural nature of this hit to demand means the 35% plunge in office values we’re forecasting by end-2025 is unlikely to be recovered even by 2040,” they added.
Office space use is under 50 percent occupancy nationwide, according to security firm Kastle Systems. Before the pandemic that figure was closer to 80 percent.
The COVID pandemic saw the rise of remote work and now millions of workers have returned to hybrid or fully remote schedules, reducing the need for large office spaces.
That reduction has led office building owners and employers to incentivize in-person work with building amenities like pet-friendly office spaces or open-plan workspaces, according to reporting from Forbes.