I've been thinking about this for quite awhile and found some discussion of it in the news and in scholarly papers. The Covid year caused many changes in society, notably the work-from-home revolution. Companies are having trouble getting people back to the office full-time, and adjusting by downsizing their office needs. A LOT. If you allow your employees to work from home one day out of five, you can reduce your office size needs by about 20%. Granted, you might have to rotate the days (it can't be Monday or Friday off for everybody every week).
Sounds great for companies that rent a lot of office space, but of course the whole city has been built up based on all those people coming in every day. The ground-floor retailers and restaurants need the lunchtime crowds to pay rent. The transit systems need the daily riders, or they will need more subsidies, just as the city's tax collections start to crater from reduced commercial real estate values and decreased sales taxes.
How bad are things? Consider these stats from a January article:
In San Francisco, office space vacancy was officially at about 24.9% as of the end of last year, but that understates the reality, as the space that is occupied is less occupied than usual due to continuing layoffs this year and fewer people working at the office. It also doesn't consider space that is officially leased but will turnover in the next year or so. And this is not some usual recession-induced vacancy; if we actually go into recession soon things will get worse before they get better.
Here's where people will argue that this represents a great opportunity to provide affordable housing by converting office space to residential. Let's just say that they have never looked at the costs. Generally the assumption is that you might as well tear down and rebuild, which means a whole lot of tearing down and not much rebuilding, because there won't be much demand for the space from the young and upwardly mobile, since the trendy bars and restaurants are all gone. Meanwhile city governments will be unable to maintain the level of services with drastically reduced revenues.
Sounds great for companies that rent a lot of office space, but of course the whole city has been built up based on all those people coming in every day. The ground-floor retailers and restaurants need the lunchtime crowds to pay rent. The transit systems need the daily riders, or they will need more subsidies, just as the city's tax collections start to crater from reduced commercial real estate values and decreased sales taxes.
How bad are things? Consider these stats from a January article:
Quote:
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Retail and restaurant spending in Boston’s Financial District was down 20 to 25 percent last year, compared to 2019. The number of workers showing up downtown remains more than 40 percent below pre-pandemic levels in New York, Philadelphia and Washington. The number of workers showing up in Pittsburgh’s downtown is down by half. |
Here's where people will argue that this represents a great opportunity to provide affordable housing by converting office space to residential. Let's just say that they have never looked at the costs. Generally the assumption is that you might as well tear down and rebuild, which means a whole lot of tearing down and not much rebuilding, because there won't be much demand for the space from the young and upwardly mobile, since the trendy bars and restaurants are all gone. Meanwhile city governments will be unable to maintain the level of services with drastically reduced revenues.
via International Skeptics Forum https://ift.tt/e8SAkwM
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