As COVID-19 continues to devastate all aspects of American life, this new reality is also playing out in the world of the office real estate sector.
According to a report by Moody & # 39; s Analytics on August 17, the office real estate sector had already experienced "downward pressure on the intensity of use of office space" before the COVID-19 crisis. According to the report, a nationwide shift towards remote working due to the pandemic is likely to "hit the office real estate sector particularly hard in the years to come."
The office area – largely due to the coronavirus – is also expected to cause stress in terms of effective rents. According to the report, effective rents will fall by 10.4% nationwide this year and as much as 21% in New York and other major markets.
Victor Calanog, director of commercial real estate economics at Moody & # 39; s Analytics in New York City, said in a press release that there are still some questions unanswered.
"Many companies continue to push for a return to the office. Some are already planning to telework in 2021," said Calanog. “It remains to be seen whether the increased availability of remote work infrastructure will affect office demand in the long term. However, due to the long-term nature of office rentals, it may take some time for vacancy rates to reflect the real trend. "
Moody's Analytics two-page report also looks at retail properties that are expected to "perform even worse than office properties".
According to the report, effective retail property rents are projected to fall 11.1% this year, "amid large store closures and increasing e-commerce threats to the sector".
The report goes on to say that there is good news in some sectors.
Industrial and multi-family houses, it says in the report. They are expected to do better than their retail and office properties.
The report continues, "Vacancies in these sectors are expected to continue to rise and effective rents are expected to be negative, but the impact will not be as severe as in retail and office properties."
Moody & # 39; s Analytics predicts in its report that the vacancy rate in the US is expected to hit a historic high of 19/9% next year and will surpass the previous record high of 19.7% in 1991. The rate is expected to be 20% in 2022, the report says. The forecast for commercial property rents and vacancies includes eight property types and more than 3,000 sub-markets across the country.
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