As the pandemic begins to recede in many parts of the world, the struggles facing offices are becoming more apparent. CEOs like Jamie Dimon are starting to doubt the future of traditional office spaces, with JPMorgan Chase shrinking its Manhattan footprint by 20%. The consequences of this trend will be far-reaching, with landlords, banks, and municipal governments all facing potential catastrophe. In the first three months of 2023, U.S. office vacancy is expected to top 20%, with actual office use pointing to a further decrease in demand. With a third of all office leases expiring by 2026, we can expect significantly lower rents or higher vacancies. The situation is compounded by rising interest rates, which have devalued other assets on bank balance sheets, and nearly $1.5 trillion in loans due for repayment by 2025. The cost of defaulted commercial loans threatens municipal budgets, as property taxes underpin city revenue. When budgets get tight, cities are faced with a difficult choice: cut certain services and risk an “urban doom loop,” or raise taxes and alienate wealthy residents. Furthermore, public and private pension funds are under threat, as the value of commercial real estate declines. Cities will have to adapt, emphasizing unique features that cannot be found elsewhere to compete with remote work, such as walkable streets or shorter commutes. Ultimately, the post-pandemic landscape represents both a crisis and an opportunity to reconsider our assumptions about work and cities.
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