First, many residents, untethered from their offices and therefore less fearful of long commutes, moved away from urban cores. The shift to remote and hybrid work prompted two further shifts in people’s behavior. Answers from the same survey suggest that office attendance has nearly reached an equilibrium. As of fall 2022, workers were going to the office an average of just 3.5 days per week, according to our survey. The preponderance of evidence suggests that hybrid work is here to stay. The main culprit behind the projected declines in demand is remote and hybrid work, of course, which became widespread during the pandemic. $800 billion of office space in just nine cities could become obsolete by 2030 As the fog lifts, sitting things out and hoping for a recovery is not an option. Stakeholders–owners, tenants, cities, investors, and banks–need to adapt, and they need to do it now. The bad news is that urban real estate is indeed facing substantially reduced demand. The good news is that the bleakest forecasts are too gloomy. We considered important factors not typically incorporated in the prophecies of doom, including long-term population trends, employment, and employment-mix trends, migration, office attendance patterns, shopping trends, and city-specific elements (such as physical structure and home price gradients), as well as information from a large global survey that we conducted. Is the doomsaying accurate? We decided to find out by building a detailed model that projects future demand for office, residential, and retail space in “superstar cities” (roughly speaking, those with a disproportionate share of the world’s urban GDP and GDP growth) in the United States, United Kingdom, Europe, and Asia.
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