In a paper about the impact of remote work on commercial office real estate found that value of offices declined 32% from the start of the pandemic. The authors also found that the effect is likely to persist in the long-run resulting in $500B of value destruction (or potentially redistribution someplace else, like home prices).
We estimate a 32.95% decline in the value of New York City’s office stock at the outset of the pandemic. We estimate that remote work is likely to persist and result in long-run office valuations that are about 28% below pre-pandemic levels.
Read Work From Home and the Office Real Estate Apocalypse.
Links to this note
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San Francisco Lost $400MM of Tax Revenue in 2021
San Francisco Mayor London Breed said that workers are not returning to the office which has resulted a loss of $400MM in tax revenue. Some of the reasons for this is fewer people in the city (while not an exodus, the office vacancy rate is more than 24%) but I suspect this is also due companies moving out of SF for tax reasons (Stripe moved to Oyster Point).
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Remote Work Raised Aggregate Housing Prices by 15%
A working paper from the National Bureau of Economic Research found that remote work raised aggregate housing prices by 15% and possibly more. This accounts for half of the overall increase in aggregate housing prices.
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Work from Home Happens the Most in Cities
The American Community Survey from 2021 by the US Census Bureau showed that the largest share of working from home was in major cities and metropolitan areas. For example, San Francisco, District of Columbia, Brooklyn, and Chicago are all in the top 10 in remote work.
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It’s becoming clear that remote work isn’t going anywhere. A large portion of the workforce continues to work from home. Return to office stagnated. Office real estate value is plummetting.
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Manhattan Workers Are Spending $12.4 Billion Less Than Last Year
A recent study found that workers in Manhattan are spending $12.4B less than last year on meals, shopping, and entertainment near their offices. The author says this is due to remote work as workers are spending 30% less days in the office. This impacts local businesses that cater to office workers but also city tax revenue.
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Outline for my annual essay about things I learned and reflections for the year.
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Office Occupancy Stagnated in 2022
According to Kastle, office occupancy stagnated after a concerted push of return-to-office plans by many businesses. Major metro areas like New York City show ~40% occupancy compared to 95% pre-pandemic.
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38% of Manhattan Office Workers Are in the Workplace
A recent survey from The Partnership for New York City found 38% of Manhattan office workers are in the workplace as of April 2022. Office employees that are fully remote dropped from 54% in late October 2021 to 28%.
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Remote Work Will Become a Political Issue
Up to this point in the COVID-19 pandemic, remote work has been a buoy keeping many parts of the economy afloat. We’ve seen that working from home was so successful and fears of loss of productivity were unfounded. Now we are starting to see a reactionary movement that will find it’s way into political agendas—how to get workers back in the office.
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Remote Work Is a Supply Side Problem
There has always been strong demand for remote work and it wasn’t until the global COVID-19 pandemic that the supply side (employers) briefly caught up.
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Remote Work Is Now a Union Negotiation Item
New York City’s largest union, District Council 37, is in the midst of negotiating a five-year deal that includes, among other things, protections for remote work. This is the first time I’ve read about large scale union negotiations that talk about remote work and, for NYC with it’s high vacancy rates, remote work could drastically improve staffing.
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Share of Remote Job Postings Increased Post Pandemic
The share of remote job postings across the US, UK, NZ, CA, and AUS have increased since the start of the COVID-19 pandemic. The following chart was reweighted based on occupation distribution in 2019.