Across the U.S., about a quarter of office workers sent home during the pandemic have returned, according to Kastle Systems, a firm that records employee card swipes in 3,600 buildings around the country.
In Chicago and San Francisco, fewer than 20 percent of desk jockeys have returned; in Texas, where COVID-related strictures have been looser, about a third of workers are back at their desks.
In Manhattan, where more than 80 percent of white collars are still working at home, 27 percent of all sublet office space is available to rent, a 50-percent increase in the last 12 months.
How and when those workers will return is a matter of debate.
More than 55 percent of at-home workers would like to remain there at least three days a week even after the pandemic has passed, a December 2020 PwC survey found. However, the same survey shows that 68 percent of bosses want their staff in the office at least three days a week.
The future of commercial real estate and downtown economies rests heavily on the result of that debate.
This year, municipal governments face losing as much as 10 percent of their pre-pandemic property tax revenues, The New York Times reported; cities and towns rely on those taxes for 30 percent or more of their general budgets.
Also, the absence of commuters starves the ecosystems of restaurants, shops, services, and entertainment venues that office workers frequent. As those businesses wither and die, tax-paying jobs are lost and properties stand idle, giving cities even less revenue from sales and property taxes.
Nationwide, American cities could confront a $90-billion budget shortfall this year, according to the National League of Cities.
Cities’ dire outlook is equaled by the $16-trillion commercial real estate sector’s bleak future.
Due to the home-working trend’s acceleration during the COVID pandemic, empty office space in Los Angeles, New York City, and Seattle grew by 25 percent last year and ballooned 75 percent in San Francisco, data from analysis firm CoStar shows.
Companies’ plans for future office space are in flux, property owners and brokers told the NYT.
In some large urban centers, 25 percent of rents are delinquent, Victor Calanog, Moody’s chief of commercial real estate economics, said in a report quoted by the NYT.
The value of U.S. retail properties will decline 16.5 percent in the retail sector and 12.6 percent for office space by the end of this year before beginning to rise again in 2022, ratings service Moody’s has predicted.
“A worrying scenario is that the economic impact” of the lockdown “outlasts the policy support programs currently in place,” Esther George, president of Kansas City’s Federal Reserve Bank, said in a February speech. “Should that occur, many renters and businesses could find themselves unable to meet their obligations, forcing banks to realize losses on existing loans and weighing… on broader economic activity.”
Demand for office space could permanently shrink by 15 percent and 20 percent of existing retail storefronts could disappear in the pandemic’s aftermath, according to CBRE, a real estate services and analysis firm.
TREND FORECAST: As city revenue decline, politicians will push through tax increases. In turn, as we have forecast, there will be strong anti-tax movements spreading across the nation.
See our new article, “ONE-THIRD OF U.S. WORKERS WILL QUIT IF FORCED TO RETURN TO OFFICE” for our workplace/real estate trend forecasts.
