{"id":4857,"date":"2023-07-13T04:25:34","date_gmt":"2023-07-13T04:25:34","guid":{"rendered":"https:\/\/mysourcefunding.com\/leadership\/demand-for-office-space-could-fall-13-by-2030-and-thats-not-the-severe-forecast\/"},"modified":"2023-07-13T04:25:35","modified_gmt":"2023-07-13T04:25:35","slug":"demand-for-office-space-could-fall-13-by-2030-and-thats-not-the-severe-forecast","status":"publish","type":"post","link":"https:\/\/mysourcefunding.com\/?p=4857","title":{"rendered":"Demand For Office Space Could Fall 13% By 2030\u2014And That\u2019s Not The Severe Forecast"},"content":{"rendered":"<div>\n<p>The office real estate market is already grim. And despite bosses\u2019 efforts to draw people back to the office, it\u2019s going to remain gloomy, even in projections that are more moderate, warns a new report from McKinsey Global Institute.<\/p>\n<p><fbs-ad position=\"top\" progressive=\"\" ad-id=\"article-0-top\"><\/fbs-ad><\/p>\n<p>The new report finds that office attendance has held steady at 30 percent below pre-pandemic norms, and that even by 2030, demand for office space will be lower than it was in 2019. In moderate scenarios, McKinsey\u2019s models suggest there will be 13 percent less demand for office space in 2030 (noting its moderate projection isn\u2019t quite as dismal as other researchers\u2019). In more severe projections, demand could fall by 38 percent in cities that are more heavily impacted.<\/p>\n<p>But it\u2019s not all bad news: Residential supply remains short, urban areas with more mixed use development won\u2019t be hit as hard as office-driven urban cores and some cities without as many knowledge workers in industries like tech or professional services, such as Houston, could actually see some growth.<\/p>\n<p>\u201cThe scariest stories you hear on this front are going to be specific with respect to geography and with respect to asset class,\u201d says Ryan Luby, a McKinsey senior expert and associate partner who worked on the report. \u201cThe hardest hit areas are going to be &#8230; undiversified central business districts that relied really heavily on folks commuting in long hours,\u201d he says, pointing to urban cores without much residential real estate, less green space or other mixed use development.<\/p>\n<p>The report looked at office real estate, as well as retail and residential space, in nine \u201csuperstar\u201d cities that have outsized shares of GDP growth. U.S. urban cores\u2014in cities like New York, San Francisco and Boston\u2014have been more affected than cities in Japan or Europe, thanks to less mixed-use development.<\/p>\n<p>The staying power of hybrid work\u2014as well as a worsening economy\u2014is clearly having an impact, and McKinsey\u2019s report suggests it could be decades before office space demand returns to pre-pandemic levels. It finds that in real terms, a total of $800 billion in value is at stake by 2030, even in its moderate scenario, and that the total value of office space could decline by 26%. While top quality \u201cclass A\u201d office space price per square foot actually rose slightly between 2020 and 2022 as employers tried to \u201cearn the commute\u201d with flashy office spaces built for hybrid work, less sophisticated buildings have seen demand fall.<\/p>\n<p>\u201cThere is a lot of capital at stake,\u201d Luby says. \u201cTrillions of dollars of valuation. &#8230; That is a recipe for high conflict, slow change.\u201d<\/p>\n<p><fbs-ad position=\"topx\" progressive=\"\" ad-id=\"article-0-topx-1\"><\/fbs-ad><\/p>\n<p>Fixing the problem won\u2019t be easy. For one, workers don\u2019t seem drawn by perks such as free meals or onsite perks like concerts on office campuses\u2014just 3% of respondents in McKinsey\u2019s survey said such perks were their top reasons for returning. And while the report suggests building more mixed-use development, constructing more flexible buildings and designing more modular spaces, conversions of existing real estate aren\u2019t easy, Ruby warns.<\/p>\n<p>\u201cThis is a structural break in economic and behavioral patterns,\u201d Luby says. \u201cHad the pandemic only lasted three or six months, I think it would have been possible to stop [those patterns]. &#8230; I don&#8217;t think it&#8217;s possible any longer, given that this has now lasted in excess of two years.\u201d<\/p>\n<p>The report also included surveys of nearly 13,000 full-time office workers across six countries about their hybrid work practices. Among respondents, 56% had a hybrid work arrangement, just 7% worked fully remote and the remainder were on-site each day.<\/p>\n<p>Interestingly, the average number of days respondents spent in office did not vary much by age, income or seniority, though there were some notable differences. Unsurprisingly, baby boomers are more likely to go to the office five days a week than younger workers, and employees are less likely to go to the office if they work for smaller companies. But it also found that junior-level workers are both much more likely than their mid- and senior-level peers to <em>both<\/em> work in the office five days a week <em>and<\/em> work entirely remote.<\/p>\n<p>The report suggests three reasons office attendance appears to have stabilized. For one, it has been steady since mid-2022. Moreover, surveys of office workers suggest the number of days they prefer to go to the office and how much they go or expect to have to go are showing narrower gaps.<\/p>\n<p>Finally, survey data suggests even highly paid, senior-level workers say they would quit their job if they had to go to work onsite every day, even being willing to trade pay for the privilege, suggesting even decision makers want hybrid work. When the boss wants to keep some of that flexibility, others will likely keep it too.<\/p>\n<p><fbs-ad position=\"topx\" progressive=\"\" ad-id=\"article-0-topx-2\"><\/fbs-ad>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.forbes.com\/sites\/jenamcgregor\/2023\/07\/12\/demand-for-office-space-could-fall-13-by-2030-and-thats-not-the-severe-forecast\/\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The office real estate market is already grim. And despite bosses\u2019 efforts to draw people back to the office, it\u2019s going to remain gloomy, even in projections that are more moderate, warns a new report from McKinsey Global Institute. The new report finds that office attendance has held steady at 30 percent below pre-pandemic norms, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":4858,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[76],"tags":[],"class_list":{"0":"post-4857","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-leadership"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.9 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Demand For Office Space Could Fall 13% By 2030\u2014And That\u2019s Not The Severe Forecast | Brandiary<\/title>\n<meta name=\"description\" content=\"The office real estate market is already grim. 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