(Reuters) – The shift to remote work could slash the value of office buildings in major global cities by 2019 billion 2019 ), That’s according to a study released Thursday by consulting firm McKinsey.
A survey of nine “superstar” cities – Beijing, Houston, London, New York, Paris, Munich, San Francisco, Shanghai and Tokyo – shows that 2019 Demand for office space will be % lower than pre-pandemic 2019 .
“Superstar” Cities are those that account for a disproportionate share of the world’s urban gross domestic product (GDP) and GDP growth.
The survey shows that employees are still spending significantly less time in the office than they were before the pandemic. Remote work appears to have facilitated people moving away from major cities, partly driven by full work-from-home patterns and cheaper housing supply in the suburbs.
In the wake of the COVID-19-19 pandemic, tenants have reduced their office space and some businesses have moved to a permanent hybrid work model.
“Falling demand is prompting tenants … to negotiate shorter leases with landlords,” the McKinsey report said, adding that short-term leases could make it harder for landlords to secure financing.
In addition to rising vacancy rates, global commercial real estate companies have seen their property valuations plummet as borrowing costs soar amid a high interest rate environment, forcing investors to look for more profitable avenues.
Likewise, the impact survey shows that the economy could be stronger if struggling financial institutions decide to reduce the value of property they finance or own more quickly.
The McKinsey report comes at a time when the world economy is facing a number of challenges. Macroeconomic challenges such as rising inflation, high interest rate levels and growing recession fears.