Remote work that started as a temporary solution at the onset of the Covid-19 pandemic has made one of commercial real estate’s most prolific sectors the biggest question mark more than two years later.
In a recent white paper, the Mortgage Bankers Association examined two potential outcomes for the U.S. office market, based on whether current trends in hybrid work permanently stick — and people continue to go into the office less frequently. The second scenario imagines what could happen if a looser labor market means employees will be prompted to go into the office more often, seeking job security.
In the “base case” scenario of widespread hybrid work, companies would require around 80% of office space they previously needed, and income and values could drop 10% to 20% — although that’s heavily dependent on location, the MBA notes. The flight-to-quality trend observed especially in the wake of the pandemic would become more apparent in this scenario, with older, outdated space likely seeing significant discounts while Class A-rated space (or higher) seeing significant premiums.
*Article courtesy of Philadelphia Business Journal
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