The period of working from home triggered by the pandemic is destroying the office sector to a large extent with increasing vacancy rates and falling real estate values. And a group of researchers, who had previously estimated the impact of remote work on office property values, revised their assessment, arguing that things were apparently worse than they thought. In a paper published last year, researchers from New York University and Columbia University estimate a 28% decline in New York City office values ​​through 2029, a total loss of $49 billion. And according to their model, that equates to a nationwide "value destruction" of $500 billion. Researchers—Arpit Gupta, Vrinda Mittal, and Stijn Van Nieuwerburgh—revised their estimates for this month in the latest version of their paper, titled "Work From Home and the Office Real Estate Apocalypse." Now, they're seeing a 44% decline in New York City office values ​​through 2029 and a nationwide $506 billion decline in just three years from 2019 to 2022. The reason behind their revised, but more dismal reviews? In their article, the authors argue that remote work has led to significant reductions in rental income, occupancy, rental renewal rates and market rents in the office sector covered by commercial real estate. All of this has had an impact on cash flow at a time when the Federal Reserve was raising interest rates aggressively. Interestingly, they discovered that low-end office properties were more susceptible to the shocks listed above and were more at risk of becoming an "idle asset." Yet there is a fundamental uncertainty in their model, as they point to the future of remote work. Examining rental level data for over 100 office markets in the US, the authors found a 18.51% decline in rental income between December 2019 and December 2020, just months after the start of the pandemic. The square meter amount of the newly signed lease contracts and the rents of the newly signed contracts also decreased in the same period. Citing New York City, where the office vacancy rate was more than 20% as of the first quarter of this year, the authors wrote, meanwhile, vacancy rates in many major markets are at record levels. In addition, the authors said they found a "direct link" between companies' remote work policies and reductions in actual office space rented. "The key takeaway from our analysis is that remote work is shaped in a way that greatly degrades the value of commercial office real estate in the short to medium term," the authors wrote. Still, the effects are not uniform across the country or across properties. The authors discovered that more recently constructed higher-end buildings, also known as higher-rent buildings, "seem to be in better condition," and they argue this is consistent with the idea that companies need to improve office quality for workers to want to come back. Additionally, they found that cities with greater exposure to working from home saw larger declines in office demand, which is evident in these two examples. When they looked at San Francisco and Charlotte, they found that the old office sector experienced even greater declines; this can be expected as San Francisco's office properties have been hit particularly hard by the shift to remote work. Still, both markets saw declines in office valuations. “We calculate a $69.6 billion decrease in the value of office stock for NYC, $32.7 billion for San Francisco, and $5.1 billion for Charlotte between the end of 2019 and 2022,” the authors wrote. “For the remaining office markets, we combine market-specific rental income reductions for NYC with valuation rate changes to calculate the depreciation. Nationwide, we see a $506.3 billion decline in office values ​​over the three-year period.” During this three-year period, the largest decreases in property values ​​relative to dollar losses were seen in New York City, San Francisco, Los Angeles, San Jose and Boston; an "urban apocalypse cycle".