Remote work risks wiping $800 billion from the value of office buildings in major cities, highlighting the potential losses that landlords are facing from post-pandemic changes in employment trends.
COVID-19’s push toward hybrid work has driven the need for office space down with vacancy rates rising, McKinsey Global Institute said Thursday in a report that modeled the impact on valuations by 2030 in nine cities globally.
The estimate for $800 billion in valuation losses represents a 26 per cent decline compared to levels in 2019, with the blow at risk of deepening to as much as 42 per cent, the consultancy firm said.
“The impact on value could be even greater if rising interest rates compound it,” McKinsey said. The bearing “could increase if troubled financial institutions decide to more quickly reduce the price of property they finance or own.”
Value of real estate changing
McKinsey’s model is offering a window on how property owners and lenders are grappling with the changes in where people work in the wake of the pandemic. The shift is also affecting the value of retail and residential real estate as people’s new habits influence where they shop and live.
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Source: gulfnews.com
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