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  5. Work From Home and the Office Real Estate Apocalypse

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Work From Home and the Office Real Estate Apocalypse

  • Arpit Gupta
  • Vrinda Mittal
  • Stijn Van Nieuwerburgh
American Economic Review (Forthcoming)

Abstract

We show remote work led to large drops in lease revenues, occupancy, and market rents in the commercial office sector. We revalue New York City office buildings taking into account both the cash flow and discount rate implications of these shocks, and find a 46% decline in long run value. For all U.S. office markets combined, we find a $556.8 billion value destruction. Higher quality buildings were buffered against these trends due to a flight to quality, while lower quality office is at risk of becoming a stranded asset. These valuation changes have repercussions for financial stability and local public finances.

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