Work from home and the office real estate apocalypse
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Work from home and the office real estate apocalypse
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Re: Work from home and the office real estate apocalypse
#2From the abstract,
“We revalue the stock of New York City commercial office buildings taking into account pandemic-induced cash flow and discount rate effects. We find a 32% decline in office values in 2020 and 28% in the longer-run, the latter representing a $500 billion value destruction.”
Is that value “destroyed”? Is it not unlocked to flow elsewhere? I’m genuinely curious about the dynamics of this.
Re: Work from home and the office real estate apocalypse
#3It will be interesting to see what happens to our cities if WFH stays/becomes the norm. So much of modern city design is built around the office, what happens when that isn't the case?
Re: Work from home and the office real estate apocalypse
#4It will be interesting to see what happens to our cities if WFH stays/becomes the norm. So much of modern city design is built around the office, what happens when that isn't the case?
Sweet ass apartments in office buildings I hope.
Re: Work from home and the office real estate apocalypse
#5It will be interesting to see what happens to our cities if WFH stays/becomes the norm. So much of modern city design is built around the office, what happens when that isn't the case?
Sweet ass apartments and communities in office buildings I hope.
Re: Work from home and the office real estate apocalypse
#6From the abstract, “We revalue the stock of New York City commercial office buildings taking into account pandemic-induced cash flow and discount rate effects. We find a 32% decline in office values in 2020 and 28% in the longer-run, the latter representing a $500 billion value destruction.” Is that value “destroyed”? Is it not unlocked to flow elsewhere? I’m genuinely curious about the dynamics of this.
You'd need to have already been equally* in residential and commercial, which are well siloed throughout all sorts of property-related industries, in order to break even and serve as a conduit for the transfer of value.
*Whatever optimal point.
Re: Work from home and the office real estate apocalypse
#7From the abstract, “We revalue the stock of New York City commercial office buildings taking into account pandemic-induced cash flow and discount rate effects. We find a 32% decline in office values in 2020 and 28% in the longer-run, the latter representing a $500 billion value destruction.” Is that value “destroyed”? Is it not unlocked to flow elsewhere? I’m genuinely curious about the dynamics of this.
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Re: Work from home and the office real estate apocalypse
#8From the abstract, “We revalue the stock of New York City commercial office buildings taking into account pandemic-induced cash flow and discount rate effects. We find a 32% decline in office values in 2020 and 28% in the longer-run, the latter representing a $500 billion value destruction.” Is that value “destroyed”? Is it not unlocked to flow elsewhere? I’m genuinely curious about the dynamics of this.
Whether value was 'destroyed' or not depends on how you look at it. $500 billion dollars worth of assets were lost by the owners of the real estate; that value is gone, and it didn't go to someone else. It just vanished. The value didn't disappear because it transferred to someone else, it went away because the asset itself become less desirable and valuable to other people. You can imagine it being like if a farmer had a bunch of grain stored in a silo and it somehow went bad. The value of the grain is gone, because no one wants rotten grain; it isn't like someone else now has that value. Sure, the other farmers will sell more of their crops, but they still have to grow that food in addition to the rotten food... there is no efficiency gained or extra production in the economy.
The money spent on that commercial real estate is gone. Those big fancy buildings will have been wasted resources and effort.
Re: Work from home and the office real estate apocalypse
#9From the abstract, “We revalue the stock of New York City commercial office buildings taking into account pandemic-induced cash flow and discount rate effects. We find a 32% decline in office values in 2020 and 28% in the longer-run, the latter representing a $500 billion value destruction.” Is that value “destroyed”? Is it not unlocked to flow elsewhere? I’m genuinely curious about the dynamics of this.
They are exaggerating it by not including the increases in value elsewhere, but there is "value" destroyed. The flow to other places is not as high as what was lost.
I think this is due to the perceived value of proximity not keeping up with technology. The "real" value of proximity fell as technology improved, and that was exposed during the pandemic. It's more of a correction than outright destruction, but it's not wrong that the overall asset class lost value.
Re: Work from home and the office real estate apocalypse
#10From the abstract, “We revalue the stock of New York City commercial office buildings taking into account pandemic-induced cash flow and discount rate effects. We find a 32% decline in office values in 2020 and 28% in the longer-run, the latter representing a $500 billion value destruction.” Is that value “destroyed”? Is it not unlocked to flow elsewhere? I’m genuinely curious about the dynamics of this.
You'd need to have already been equally* in residential and commercial, which are well siloed throughout all sorts of property-related industries, in order to break even and serve as a conduit for the transfer of value. *Whatever optimal point.
An individual investor would need to have that balance to not lose value, sure.
But a society as a whole, is the $500B "destroyed"? Or is there a transfer from the property owners to the businesses that no longer rent the space? The NPV of those decreased rent costs may just happen to be about $500 billion, right?
Not to mention the value gained by all the no-longer-commuting workers.