Close to 18 months ago, McKinsey projected long-term impacts the pandemic might have on commercial real estate. The firm just revisited the predictions to see how they held up.
Unfortunately, McKinsey's latest projections painting a sobering picture for the future of office spaces. The firm estimates that by 2030, the sector could face a staggering $800 billion loss in real terms under a moderate scenario, translating to an average office value drop of 26% in just five years. This dramatic decline is primarily driven by a persistent fall in demand for office space, a trend that has been unfolding since 2019.
The market trends between 2019 and 2022 tell a compelling story of this shift. Total dollar transactional volume of office space plummeted by 57%, while the average sale price per square foot saw a 20% decrease. Additionally, asking rents in real dollars experienced a significant 22% drop. These figures underscore the profound changes taking place in the commercial real estate sector.
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