Around 18 months ago, McKinsey forecasted the potential long-term effects of the pandemic on commercial real estate. The firm has since revisited those predictions, and say the outlook for office spaces remains bleak.
McKinsey’s updated projections reveal a stark future for the sector, with a potential $800 billion loss by 2030 under a moderate scenario. This could result in an average office value drop of 26% over the next five years.
The ongoing decline in office space demand, a trend that began in 2019, is the primary driver behind this projection, according to Globest.
Looking at market data from 2019 to 2022, the reason behind the shift becomes clear. The total transactional volume of office space fell by 57%, while the average sale price per square foot dropped by 20%. Additionally, asking rents in real dollars saw a notable decrease of 22%.
With the prospect of billions in losses, the question is not if the market will change, but how quickly businesses can pivot to meet the needs of a workforce that increasingly values flexibility over permanence.
