One of the Most Overlooked Reasons for Returning to the Office Just Got a Lot More DireAttendance at office buildings in major cities from San Francisco to New York remains below pre-pandemic levels.
ByAmanda Breen•
When we talk about employees returning to in-person work, the conversation often turns to alleged benefits like increasedproductivityand improvedcommunication.
But the health ofcommercial real estateand the economy are also critical considerations. In arecent report, Morgan Stanley analysts predicted the situation's about to get worse, with commercial property prices tumbling as much as 40% — rivaling the dip during the 2008 financial crisis.
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Three years into the pandemic, attendance at office buildings in major cities including New York, Boston, Atlanta and San Francisco remain low, and many companies choose to move to smaller spaces when leases are up for renewal,The New York Timesreported.
At the end of March, San Francisco Mayor London Breed's officesaidit anticipated a $780 million budget shortfall in the next two fiscal years through 2024 as a result of higher interest rates and widespread remote work that "makesoffice spacean unattractive investment."
Not only are trillions of dollars of commercial mortgage debt on track to mature in the next several years — likely amid evenhigher interest rates— but there's also the concern about how under-utilized office buildings will continue to impact the rest of the economy,MarketWatchreported.
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"These kinds of challenges can hurt not only the real estate industry but also entire business communities related to it," Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, wrote.
