Office vacancies are at a critical state in the City.

0:00 Speaker 1 With us today is Rinda Mittel and she is going to be an assistant professor at University in North Carolina. She graduated with a PhD in finance and economics at Columbia and right after COVID she started doing research and what the heck is going on in real estate in New York and Veranda. You have made a couple of

0:29 expose as of what’s going on. I understand you were in some of the major newspapers and I guess the people of New York would like to have you from you.

0:40 Speaker 2 Yeah, so thank you John for having me. We started working on this project right after the COVID pandemic and we noticed that there was a lot of remote work going on and companies then then to have important policies they were willingked to accommodate hybrid work, and naturally one of the estate real estate which is directly hit is

1:07 commercial real estate and specifically offic So we started writing this paper where we wanted to see what is the effect on office values of New York when working from home kicks in And so the main headline number of the paper is that in working from home was to continue for about sixty seven years, going forward on average

1:30 New York City real estate with the plan in value by about forty four percent by twenty twenty nine relative to the pre pandemic levels, and in the short term that decline was about forty six percent in twenty twenty.

1:45 So really, we think that this is a huge shock to office values, not only for now but also in the future to come.

1:53 Speaker 1 Understood. So you’re seeing the values because of the exodus from New York of our people. I understand in the last twelve months, four hundred and eighty four thousand people have moved out of New York because of the exodus, because people are not coming to the office because I guess so many other reasons, that the value of the

2:22 office building real estate is going to go the heck and only going to be worried for you said forty twenty twenty nine.

2:30 Speaker 2 Yeah, that’s right, relative to what it was before the pandemic understood understood.

2:38 Speaker 1 So what are any suggestions, any recommendations.

2:43 Speaker 2 Well, a lot of it is is yet to pay out, that’s what we think. I mean, a lot of Class B and C buildings, which are the older buildings. You know, they were built probably far back in time. They’re hit more and aim plus buildings, which we define are the top ten percent of the buildings in that effective rent,

3:06 which is effectively the rent was the tenant phase, are actually doing better. Right, So you can think of this as a menetization of the office space or a flight to quality argument that people really want those amenities to come back to the office. So one of some suggestions going forward are either there would be some conversions of

3:27 these buildings, right, if not from office to something else, maybe like multi family apartments or tenants need to be given or probably you know, better terms on their leasers for them to get to sign these nons leasers.

3:44 Speaker 1 Well, the other problem that New York has is people don’t feel safe writing in the subways, don’t feel safe walking around the streets, don’t feel safe or going to the restaurants at night.

3:58 Speaker 2 Yes, that’s there, and I think that has really been worse after the pandemic, and which is also what we kind of relate to that at the urban doom loop in the paper. Right, So if people are really not coming into the office, they’re not kind of demanding that space, they’re going out of the cities, as you mentioned right

4:19 at the beginning. Then even the government is hit because is this the.

4:24 Speaker 1 Taxes will be got We’re down to thirty seconds we have left. Is this the doom of the cities of the Northeast.

4:33 Speaker 2 We think yes, we think a lot of it is get to play out and the cities will also be hit in the future.

4:41 Speaker 1 Well, thank you so much for coming on, thank you for your study, thank you for telling us the truth. And we’ll catch up with you again real soon. Thank you so much.

4:50 Speaker 2 Thanks John, nice to talk to you. Thank you