Corporate workers who are either too afraid or lazy to go to the office are having a significant impact on the economy, and not in a positive way. A new study by the McKinsey Global Institute says that the work-from-home pajama patrol will be responsible for wiping out $800 billion of value in office buildings by 2030.
Incredibly, only 37% of workers have returned to the office every day since the start of the pandemic, and commercial real estate values are getting pummeled because of it. According to McKinsey’s report, this trend is the new norm.
“Hybrid work is here to stay. Urban real estate in superstar cities around the world faces substantial challenges. And those challenges could imperil the fiscal health of cities, many of which are already straining to address homelessness, transit needs, and other pressing issues.”
The report focused on data from nine cities it refers to as “superstar” cities — cities that produce a disproportionate share of gross domestic produce. Those cities were Shanghai, Tokyo, Paris, Munich, New York, San Francisco, Houston, London, and Beijing.
For companies looking for office space, there are deals to be had. New York City commercial rent prices were down 22% from 2019, and San Francisco rent prices are down nearly 30%.
McKinsey offered some suggestions for cities dealing with this downturn in office space rental. The report suggested companies adopt a “hybrid approach” to combat the problem. More specifically, developing buildings that have both office and retail space available to adapt and serve other purposes.
No city is seeing a bigger defection of businesses and retailers than downtown San Francisco, California. Due to extremely progressive policies, retailers like Nordstrom, Old Navy, Saks Off Fifth, Office Depot, Anthropology, and AmazonGo made a swift exit from the city.