May 28, 2025
Ever since the pandemic flipped the world upside down, the commercial real estate market — especially the office sector — has been trying to find its footing.
According to recent research from NYU, UNC, and Columbia, office occupancy rates across major U.S. cities dropped by 90% almost overnight in March 2020.
Even though things started to rebound by the end of 2023, occupancy is still only about half of what it was pre-pandemic.
Hybrid work is playing a huge role in this slow recovery. Companies that expect employees in the office just one day a week have seen their demand for space drop by about 41%.
But for those requiring workers to show up two to three days a week, the decline is much smaller, at only 9%.
And interestingly, companies bringing people back four or five days a week have actually increased their space needs slightly.
It’s clear: the more in-office days, the less drastic the cutbacks in office demand.
The financial impact has been massive. New York City's office market alone lost $90 billion in value between December 2019 and December 2023.
Across the country, the total hit to office values reached a staggering $557 billion.
Even looking ahead to 2030, researchers project that NYC office values could stay nearly 50% below their 2019 levels — or even worse if remote work trends deepen.
Leasing activity is also way down. New lease signings have dropped from 414 million square feet per year to about 150 million.
Existing office leases are struggling too, with rent growth lagging behind inflation. That said, not all offices are hurting equally.
There’s been a “flight to quality,” where top-tier, amenity-filled office spaces are holding up better than older, less-updated buildings.
Companies know that if they want employees to come back, they need to offer spaces worth commuting for.
The bigger concern is what this all means for cities. Commercial property taxes make up around 10% of city budgets.
Falling office values could lead to service cuts, higher taxes elsewhere, and — ultimately — less attractive cities.
One potential silver lining? Office-to-residential conversions. Programs like New York's Office Conversion Accelerator are pushing hard to turn empty offices into much-needed housing.
It's not a quick fix, but it's one way to help cities adapt and keep downtowns vibrant in a changing world.
Disclaimer: This content is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice.
