A peak in office vacancies in 2026 could reduce value by $250 billion

For those who (like many others) are wondering what impact home working will ultimately have on office real estate, let me tell you: “Home working is not going away.”

They created a series of scenarios to forecast vacancy rates. “In the lowest case of a reduction in demand for remote work, i.e. 12% less demand, vacancy peaks at about 22.5% in 2026. The larger declines in demand naturally led to direr estimates, which were 26.2% and 28.4% for 20% remote work and 25% remote work rates, respectively,” they wrote.

The lowest scenarios, with a decline in demand due to working from home of 12% and 14%, were in line with the trends that Moody’s is already observing. The highest scenarios, at 20% and 25%, seem too high.

Instead, “our model shows that the impact of working from home on office demand will average about 14% over a 63-month period, resulting in vacancy rates that peak at about 24% nationwide in early 2026.” That would be a significant increase from the 19.8% rate seen in the first quarter of 2024.

“The discourse on the supposed benefits of working in the office, emphasized by some CEOs, has been very present in the media,” they wrote. “Nevertheless, the argument for maintaining or even expanding telecommuting remains compelling for many companies. If productivity remains stable and costs can be reduced by eliminating physical office space, the rationale for mandating in-office attendance diminishes.”

Other organizations are seeing similar data. JLL wrote, “This year’s Occupancy Planning Benchmarking Survey shows that over 80% of organizations now have a hybrid program in place and nearly 50% plan to expand their policy over the next three years. While hybrid programs offer employers and employees opportunities in terms of flexibility, space diversity and optimization, they also bring challenges. Managing fluctuating weekly occupancy patterns, increasing technology demands and a reduced employee experience in a dynamic workplace places more complex demands on real estate.”

The disruptions to working from home and office use will have a major impact on property values, according to a separate analysis by Moody’s received from Bloomberg. The expected increase in vacancy rates will result in revenue losses for office owners of eight to ten billion dollars.

“That, in turn, could lead to a quarter-trillion dollars’ worth of real estate ‘value destruction,'” said Todd Metcalfe, Moody’s associate director of commercial real estate (CRE) forecasts, and Tom LaSalvia, Moody’s head of CRE economics, in a separate analysis not included in the report. Bloomberg wrote.