Office demand may not "die" anytime soon, but it's definitely changing, with big shifts expected to play out in the intermediate to long term and the national vacancy rate forecast to rise to "near-record levels" in 2021 before beginning a slow decline starting in 2024.

A new report from Moody's Analytics REIS predicts effective rents will decline 7.5% this year—a significant number, to be sure, but not quite to the level of the Great Recession, when effective rents fell 8.9% in 2009. REIS analysts point out that even in New York City, a metro that's been synonymous with the precipitous declines wrought by COVID-19, effective rents showed a fraction of the declines they expected last year: asking rents fell by 1.0% (after they expected a fall of 4.4%) and effective rents declined by 2.4% (versus an anticipate decline of 8.6%). 

And while fairly large declines in rents are still forecast for New York City in 2021 and 2022,  "unlike multifamily, we have, as a whole, revised our expectations for the office sector towards less severity in the near-term," the report states. "However, anticipating the longer-term nature of how the office sector may evolve as a response to the COVID crisis, we have also extended the time period before the expected recovery ensues…If the so-called office apocalypse has indeed been cancelled (for now) this does not mean that distress is not present; neither does it mean that there was no distress throughout 2020. The distress was simply very uneven."