Workers will likely spend 20% to 25% less time in the office than before the pandemic, according to the head of real estate brokerage CBRE Group.
Chief Executive Officer Bob Sulentic said companies such as CBRE are seeking to balance in-person work with the recognition that people don’t want to spend hours in traffic.
The rise in remote work since the pandemic has had far-reaching implications for the real estate industry, including property owners that Sulentic’s company counts as clients. Office landlords have been confronting declining tenant demand as more companies adopted remote-work policies. That’s pushed the office vacancy rate in the US up to 18.4% in the third quarter, according to CBRE.
Landlords have also been pressured by the rise in borrowing costs, which has contributed to a nearly 21% decline in office prices in the 12 months through October, according to real estate analytics firm Green Street. Investors including Brookfield Asset Management Ltd. have defaulted on debt and walked away from buildings.
Sulentic said higher borrowing costs have dented commercial real estate valuations more than his firm originally forecast.
“We thought values may come down 15%, 20%. We now think that may be another 10%,” Sulentic said.
He noted price declines were “most acute” for office buildings.