Remote Work’s Effect on the NYC Real Estate Market
The real estate market in New York City is strongly affected by changes in the white collar workforce, due to the city’s status as the finance and banking capital of the United States and the world. For hundreds of years, people have come to New York by the millions to do business, buy, sell, and trade. That’s still true today, but the rise of remote work since the COVID-19 pandemic has complicated the picture. It’s also upended the real estate market, especially commercial real estate. According to the Chicago Booth Review, the value of New York City office space fell by almost 50% between December 2019 and December 2020. From the period December 2019 to December 2023, NYC office real estate lost $90 billion in value—the largest decline among all US cities in absolute terms.
The economic shutdown and social distancing during the pandemic demanded a shift toward remote and hybrid work models. Though the emergency is behind us and many companies have enacted return-to-office policies, remote work has not returned to pre-pandemic levels, and probably never will. Remote work represented one in four paid workdays in 2024, well up from one in 14 prior to the pandemic, according to WFH Research. A study by Pew Research Center found that among workers who can work from home, 75% do so at least some of the time.
Part of this is due to the fact that some companies see no benefit in bringing their employees back into the office full time after adapting their processes to accommodate pandemic-era challenges. However, the larger factor may be the fact that employees got used to the flexibility of working remotely during the pandemic and are unwilling to return to the office grind full-time. For instance, Pew Research found that almost half of workers who are currently allowed to work from home would likely leave their job if their employer revoked this privilege.
While return-to-office mandates are increasingly popular, other companies see value in remote work, at least in certain industries and for certain jobs. In the fourth quarter of 2024, nearly half of all new creative, marketing, and technology job openings were remote or hybrid, while more than 40% of new HR and finance/accounting job postings were for remote or hybrid positions. While legal job postings were slightly less flexible, but still, a considerable number of postings (37%) allowed for remote or hybrid work.
How Remote Work Has Impacted the NYC Real Estate Market
The effects of remote work has had a lasting impact on the real estate market throughout the United States, especially in major business centers like New York City. According to a study titled Work from Home and the Office Real Estate Apocalypse, remote work reduced lease revenues, occupancy levels, lease renewal rates, and market rents in commercial office real estate. It should come as no surprise that commercial real estate values have dropped since the shift toward remote work, since fewer office workers mean less need for office space. However, the scope of the market decline has been surprising, even for researchers. In the study, after considering cash flow and discount rate implications of the shift, they found that office buildings in New York City had suffered a 39% decline in long-term value. In addition, they found a $413 billion destruction in commercial real estate value across the United States. The ramifications of this market upheaval on both investors and property owners can’t be overstated.
Of course, the impact of remote work on the New York real estate market is not confined to commercial real estate. Residential real estate has also been affected. More high-income professionals found themselves free to work from home at least some of the time, which gave them the flexibility to live further away from business centers. For example, in 2018 and 2019, about 40,000 remote workers moved out of NYC; in 2020 and 2021, a total of 200,000 did, according to the New York Times. Even accounting for migration into the city, New York still experienced a significantly larger net outflow of remote workers.
Cautious Optimism in 2025
Though the outlook is far from certain, investors offered cautiously optimistic takes on the state of the NYC commercial real estate market at an event at the Stern School of Business at New York University in late January 2025. Rising returns, greater appreciation, and more transactions were among the “hopes and expectations” in a report on 2025 emerging trends in real estate commissioned by PwC and the Urban Land Institute. The report was discussed at the January meeting but was created in fall 2024, and its projections depended in part on lower interest rates. It’s now more uncertain when interest rates will fall. The Fed held rates steady at 4.5% at its March 2025 meeting.
Nevertheless, measured optimism seems to be widespread. The New York Times in late March 2025 reported that office landlords’ “bad dream that began in March 2020” may finally end soon, based on last year’s uptick in sales of office buildings in central business districts across the US. Nationwide, leasing activity also grew in 2024, and in more expensive locations like NYC, the average asking rate increased. These trends are due in part to return-to-office mandates.
As the future of remote work continues to unfold, it will clearly have an ongoing impact on the real estate markets of urban centers such as New York City. While it is impossible to predict with 100% accuracy how this situation will develop over the five years, it is clearly a factor that savvy real estate investors need to keep tabs on, both in New York City and throughout the country.
