After Pandemic, Shrinking Need for Office Space Could Crush Landlords

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Some big employers are giving up square footage as they juggle remote work. That could devastate building owners and cities.

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As office vacancies climb to their highest levels in decades with businesses giving up office space and embracing remote work, the real estate industry in many American cities faces a potentially grave threat.

Businesses have discovered during the pandemic that they could function with nearly all of their workers out of the office, an arrangement many intend to continue in some form. That could wallop the big property companies that build and own office buildings — and lead to a sharp pullback in construction, steep drops in office rents, fewer people frequenting restaurants and stores, and potentially perilous declines in the tax revenue of city governments and school districts.

In only a year, the market value of office towers in Manhattan, home to the country’s two largest central business districts, has plummeted 25 percent, according to city projections released on Wednesday, contributing to an estimated $1 billion drop-off in property tax revenue.

JPMorgan Chase, Ford Motor, Salesforce, Target and more are giving up expensive office space and others are considering doing so. Jamie Dimon, chief executive of JPMorgan Chase, the largest private sector employer in New York City, wrote in a letter to shareholders this week that remote work would “significantly reduce our need for real estate.” For every 100 employees, he said, his bank “may need seats for only 60 on average.”

And just as Coca-Cola’s profits would take a seismic hit if consumers abruptly cut back on sodas, owners of office buildings, many of which are owned by pension funds, insurance companies, individuals and other investors, could be pummeled if many businesses rent less space. “The pandemic has proven that work from home is viable,” said Jonathan Litt, chief investment officer of Land & Buildings, a real