According to a top executive in the industry, the commercial real estate office crash is here.
John Burns, CEO of John Burns Real Estate Consulting, said in an interview with Fortune magazine that the office market is in the midst of a "paradigm shift" as more and more companies move to hybrid or remote work arrangements.
"We're seeing a collapse in demand for office space," Burns said. "We're seeing a collapse in rents. And we're seeing a collapse in values."
Burns said several factors, including the rise of remote work, the increasing popularity of co-working spaces, and the aging workforce, are hitting the office market.
"The office market is in a death spiral," Burns said. "And it's going to get worse before it gets better."
Burns's comments come as the office market is already facing several challenges. In the first quarter of 2023, office vacancy rates in major U.S. cities reached their highest levels since the early 1990s.
The office market is expected to continue to decline in the coming years. Burns predicts that office vacancy rates will reach 20% by 2025.
The decline in the office market is having a ripple effect throughout the economy. Commercial real estate investment trusts, which own office buildings, are seeing their stock prices fall. And construction of new office buildings has come to a halt.
The decline in the office market is also hurting the workforce. As companies move to remote work, they are laying off office workers.
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